Treasury Secretary Timothy Geithner unveiled an overhauled version of the financial bailout plan Tuesday, announcing a program that could direct well over $1 trillion in public and private support to get credit flowing and aid struggling banks.
The Obama administration detailed its new approach to the bailout shortly before the Senate approved an $838 billion economic recovery package -- a separate measure aimed at saving or creating up to 4 million jobs.
But Geithner said the battle against recession must be fought on two fronts: "We have to jump-start job creation and private investment, and we must get credit flowing again to businesses and families."
The new plan details how the administration will spend the remaining $350 billion of the $700 billion financial rescue program. But the plan goes well beyond that, envisioning big investors buying billions in troubled assets from the banks.
The markets were not convinced. Wall Street suffered its steepest selloff in three months on Tuesday as the markets fretted about a lack of details in the plans unveiled by Washington.
The Dow Jones Industrial Average lost 382 points, or 4.62 percent, falling to 7,889.
Geithner said the program is "essential" but that the previous version under the Bush administration "was not comprehensive or quick enough to withstand the acute pressure brought on by a weakening economy."
Part of the revamped program would create a partnership between the government and the private sector to get private investors to buy bad assets that are currently weighing down the balance sheets of banks. According to the Treasury Department, the initial scale of the plan would be up to $500 billion, with the potential to expand up to $1 trillion.
Another part of the plan would greatly expand an effort to unclog credit markets that provide loans to consumers and businesses. Funding for this effort would see a huge increase -- from $20 billion up to $100 billion.
"Right now critical parts of our financial system are damaged," Geithner said. "Instead of catalyzing recovery, the financial system is working against recovery and that's the dangerous dynamic we need to change."
If a total of $100 billion from the bailout fund were used, it would be enough to support an additional $1 trillion in lending support through a Federal Reserve program announced in November but not yet operational. The Federal Reserve said the program would be expanded to cover the troubled commercial real estate market and certain residential mortgages.
With just those two programs, Geithner outlined efforts that could total more than $1.5 trillion. However, the public-private partnership to sop up bad assets would depend heavily on how much interest the private sector had in participating in the program. Details of that effort were still being worked out.
And the projected $1 trillion partnership with the Federal Reserve to unclog the markets supporting credit card debt, auto loans, student loans and small business loans would also depend on the interest that private investors would show in participating in a program the Fed has been working for months to launch.
Asked whether $1.5 trillion was enough, House Majority Leader Steny Hoyer, D-Md., was incredulous.
"What an era in which we live in which a serious question is whether $1.5 trillion is enough," Hoyer said.
But a government official said if it's not enough, the administration will ask for more.
"If it looks like we're going to need more capital, we're going to work with Congress," an official told FOX Business Network.
Geithner addressed concerns that the previous version of the plan doled out money with little accountability as to how it was spent. He said the administration would "fundamentally reshape" the program, attaching "strong conditions to protect the taxpayers."
Under the plan, firms will be required to show how the government aid is expanding lending. The administration plans to post all such disclosures on the Web site, www.financialstability.gov.
The plan would also limit executive compensation and restrict dividend payments for bailout recipients.
Also, at least $50 billion will be included to modify mortgages for homeowners facing foreclosures.
Sources close to the process said Treasury officials told senators that the mortgage modification program could require as much as $100 billion, and a House staff member confirmed that at least $50 billion would be spent on this program. The Obama administration will announce specific terms and details of that program within two weeks, sources said.
U.S. Sen. Bob Corker, R-Tenn., said the revamped plan unveiled Tuesday is too "vague."
"It's evident to me that there's still dissension within the White House about what to do. That was the first thing that became very clear. And I think that that roiled the markets today," he said.
Corker encouraged the administration to take more time to develop the plan, but said he stands ready to work with the White House.
FOX Business Network's Peter Barnes, FOX News' Trish Turner and The Associated Press contributed to this report.