Bank stocks and the broader market fell sharply Monday as the market digested permanent alterations to the financial landscape: the exit of two New York investment banks and the system's exposure to steep losses at one of them.

The KBW Bank Index fell 8.42%. The Dow Jones industrial average fell 4.42%, and the Standard & Poor's 500 fell 3.69%, despite efforts by bankers and regulators to calm investor fears, including the creation of a $77 billion fund to aid troubled companies.

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