A stunning makeover of the Wall Street landscape sent stocks falling precipitously Monday, with the Dow Jones industrials losing 500 points in their worst slide since the September 2001 terrorist attacks. Investors worldwide recoiled after a shakeup of the financial industry that took out two storied names: Lehman Brothers Holdings Inc. and Merrill Lynch & Co.

The 504-point drop represents its sixth-largest point drop ever and its worst showing since the aftermath of the Sept. 11, 2001, attacks.

Overseas, Asia's markets felt the effects of a steep drop in U.S stocks Monday. Both Japan's Nikkei 22 index and Hong Kong's Hang Seng Index were closed Monday during holidays. When they reopened, it was more like a trap door than the front door.

The Nikkei 225 stock average shed 605.04 points, or 4.95 percent, to 11,609.72 -- its lowest close since July 2005. The broader Topix fell 5.07 percent to 1,117.57.

Hong Kong's blue-chip Hang Seng Index shed 5.4 percent.

Japan's central bank on Tuesday injected a total of 2.5 trillion yen, or about $24 billion, into money markets. The bank issued a statement vowing to take measures to maintain stability in the country's financial markets. Cabinet ministers, along with the central bank chief, were also holding an emergency meeting.

Across the region, markets were all deep in the red.

Lehman Brothers said it has stopped trading of its warrants on the Hong Kong stock exchange.

The investment bank said in a statement to the Hong Kong stock exchange Tuesday it stopped trading because it filed for bankruptcy in the U.S.

The statement said trading in Lehman Brothers' warrants will be suspended until further notice and that "Lehman Brothers Asia Limited will suspend its obligations to provide liquidity for the issuer's warrants."

The world markets dropped dramatically after Lehman Brothers, a 158-year-old investment bank choked by the credit crisis and falling real estate values, filed for Chapter 11 protection Monday.

The U.S. credit crisis has caused global banks to write down more than $300 billion in asset value since last year. Along with the bad news for Lehman's, it was announced over the weekend that Merrill Lynch & Co. would be sold to Bank of America.

While expressing sympathy for those caught in the Lehman Brothers-Merrill Lynch fallout, President George W. Bush said federal policymakers will focus on "the health of the financial system as a whole."

Speaking Monday at a Rose Garden ceremony for the visiting Ghanian President John Kufuor, Bush said the goal is to "reduce disruptions and minimize the impact of these financial market developments on the broader economy."

The president also said he's confident that capital markets are "flexible and resilient and can deal with these adjustments" in the financial markets.

Bush conceded in his statement that Americans "are concerned about the adjustments that are taking place in our financial markets."

Treasury Secretary Henry Paulson said Monday the American people can remain confident in the "soundness and resilience in the American financial system."

Briefing reporters at the White House on Monday, Paulson said he "never once" considered it would be appropriate to put taxpayer money at risk to resolve the problems at Lehman Brothers.

Starting Friday, Paulson participated in three tense days of negotiations at the New York Federal Reserve Bank in which he held firm to the position that the federal government would not step in and supply any money to resolve the crisis at Lehman.

More Bank Turmoil

In addition to the Lehman Brothers bankruptcy came news that Merrill Lynch & Co. Inc. sold itself to Bank of America and American International Group Inc. -- the world's largest insurance company -- plans to announce a major restructuring.

The Merrill Lynch deal would create a bank offering everything from fixed-income trading to credit-card lending. It would rival Citigroup, the biggest U.S. bank in terms of assets. The all-stock transaction is worth about $50 billion.

"Acquiring one of the premier wealth management, capital markets, and advisory companies is a great opportunity for our shareholders," Bank of America Chairman and Chief Executive Officer Ken Lewis said in a press release. "Together, our companies are more valuable because of the synergies in our businesses."

The deal should lift the uncertainty shrouding Merrill since the start of the credit crisis over a year ago.

Charlotte, N.C.-based Bank of America has the most deposits of any U.S. bank, while Merrill Lynch is the world's largest and most widely recognized brokerage. A combination of the two will create a global financial services giant involved in everything from fixed-income trading to stock underwriting to credit card lending.

AIG Allowed To Borrow From Subsidiaries

New York's governor said he will allow AIG to use $20 billion in subsidiary company assets to provide the cash needed for the troubled insurer to stay in business.

Gov. David Paterson said Monday he's asked state insurance regulators to essentially allow AIG to provide a bridge loan to itself. Paterson has also asked the head of New York's insurance department to talk with federal regulators about more loans. Paterson says AIG remains financially sound.

AIG has been battered by billions of dollars of losses tied to deterioration in the mortgage and credit markets. Shares of AIG fell 50 percent to $6 in afternoon trading. They had been as low as $3.50 before Paterson's comments.

Candidates Sound Off

With chaos rocking financial markets, John McCain assailed "greed and corruption" on Wall Street and promised to clean it up, while Barack Obama blamed White House policies and said his opponent would only deliver more of the same.

The presidential candidates struggled on Monday to seize control of the issue voters say is most important - the economy - with Republicans and Democrats alike saying the man who succeeds may well win the election.

However, in a dizzying day of speeches and statements, neither White House hopeful offered any fresh ideas for turning things around. Instead each relied on the same vague, though vastly different, pitches he has sounded over the past few months for fixing what ails the country.

And they didn't emphasize that they are part of the Congress that has done little to head off the crisis. McCain is a four-term Arizona senator, Obama a first-termer from Illinois.

Bemoaning "the most serious financial crisis since the Great Depression," Democrat Obama faulted Republican McCain's domestic policy agenda as the same as President Bush's - "one that says we should just stick our heads in the sand and ignore economic problems until they spiral into crises."

McCain declared in a new TV ad, "Our economy is in crisis. Only proven reformers John McCain and Sarah Palin can fix it" - though he also told voters in Jacksonville, Fla., "The fundamentals of our economy are strong."

While presidents -- and candidates of the party occupying the White House -- often take credit for good economies and try to avoid blame for bad ones, financial crises nearly always have multiple causes.