When Wall Street suffers, so does the rest of the world.

Investors suffered their worst losses since the September 11, 2001, terror attacks Monday as U.S. government officials raced to prevent the financial crisis from spreading.

World stock markets swooned again Tuesday as the mess caused investors to worry that asset prices haven’t yet hit rock bottom. Financial stocks across Europe took a pounding after the bankruptcy of U.S. investment bank Lehman Brothers and news of Merrill Lynch’s takeover by Bank of America. Asian markets also took a pounding. Credit downgrades of American International Group Inc., the world’s largest insurer, also stoked investor fears of wider financial and economic damage.

"My guess is that we haven’t seen the bottom," said Tony Dolphin, director of economics and asset allocation at Henderson Global Investors in London, to the AP. The markets "don’t feel as panicky as yesterday," Dolphin said, but concerns remain about the crisis extending its reach from the financial sector to the wider economy.

The New York Times reports that officials at the Federal Reserve were considering lowering interest rates at a meeting Tuesday. Such a move would follow a pattern of rate cuts after catastrophes, although some don’t think that’s in the cards. The Fed also took steps to ease rules separating banks and investment banks to make it easier for healthy companies on Wall Street, like Goldman Sachs, to buy up troubled institutions.

But Reuters reports that Goldman Sachs said on Tuesday third-quarter earnings plunged 70 percent, reporting a net income of $845 million, or $1.81 a share, for the quarter ended August 29, down from $2.85 billion, or $6.13 a share, a year earlier. Net revenue fell by half to $6.04 billion from $12.3 billion.

The Times also reports that leading British bank Barclays is in talks with Lehman Brothers about possibly acquiring some of its assets. Barclays said in a statement that it was discussing “certain Lehman Brothers assets on terms that would be attractive to Barclays shareholders.”

Lehman employees arrived at work in Midtown Manhattan Monday with little to do, many spending their time polishing their résumés and trying to make jokes. Workers at Merrill Lynch, meanwhile, are also worried about their jobs. Bank of America said it planned to cut $7 billion in costs from Merrill over four years from the consolidation, which could result in thousands of layoffs.

President Bush, meanwhile, characterized the recent events as short-term market adjustments that would have a limited effect on an otherwise sound economy.

“I know Americans are concerned about the adjustments that are taking place in our financial markets,” Bush said. “In the short run, adjustments in the financial markets can be painful — both for the people concerned about their investments, and for the employees of the affected firms. In the long run, I’m confident that our capital markets are flexible and resilient, and can deal with these adjustments.”