Citigroup was one of the hardest hit, its stock declining by 26 percent during the day. According to the Guardian, the company now has a market value of around $25 billion - a tenth of what it was under two years ago.
Meanwhile, JP Morgan Chase saw its shares down by approximately 18 percent and Bank of America took a 14 percent hit.
Confidence was sapped further by Labor Department figures, which showed initial claims for state unemployment benefits for the week to November 15th standing at a seasonally adjusted 542,000 - up from 515,000 the week before. This is the biggest weekly increase since 1992.
There was also bad news for US carmakers, with Treasury secretary Henry Paulson saying there is no sense in pumping money into the industry without a "clear path to viability."
Overall, the Dow Jones Industrial Average closed at 7552.29, with the S&P 500 at 752.44 - its lowest close for 11 years.