(By Salman - iStockAnalyst Writer)

US stocks plunged on Tuesday on concerns that the new bank plan announced by Timothy Geithner might not be able to stabilize the financial system and restore investor confidence in the banking system.

The Dow Jones Industrial Average fell 9.72 points or 0.12% to finish at 8,270.87. The S&P 500 added 1.29 points or 0.15% to 869.89. The Nasdaq Composite soared 0.15 points or 0.01% to 869.89.

US Treasury Secretary Timothy Geithner's speech outlining the new bank plan wasn't received well by the market as it was found lacking in detail and clarity. "The battle for economic recovery must be fought on two fronts. We have to both jump start job creation and private investment, and we must get credit flowing again to businesses and families," Geithner said. "Our plan will help restart the flow of credit, clean up and strengthen our banks, and provide critical aid for homeowners and for small businesses. As we do each of these things, we will impose new, higher standards for transparency and accountability."

Meanwhile, Senators on Tuesday approved the $838 billion economic stimulus bill by a vote of 61 to 37.

Testimony from Federal Reserve Chairman Ben Bernanke added to the gloom. "Although the provision of ample liquidity by the central bank to financial institutions is a time-tested approach to reducing financial strains, it is no panacea," said Bernanke.

Financial stocks plunged after Geithner announced a "comprehensive stress test" for the banks so as to ensure that they come out with a cleaner and stronger balance sheet. As part of the plan, all major U.S. banks with more than $100 billion in assets will be required to undergo a rigorous stress test to determine if they can survive a more severe economic downturn. If they can, they'll be eligible for federal capital.

Bank of America (NYSE: BAC) tumbled $1.33 or 19.30% to $5.56. Citigroup Inc. (NYSE: C) tumbled 60 cents or 15.19% to $3.35. Wells Fargo & Company (NYSE: WFC) plummeted $2.71 or 14.22% to $16.35.JP Morgan & Chase & Co. (NYSE: JPM) and American Express Co. (NYSE: AXP) and Morgan Stanley (NYSE: MS) lost over 9%.

Lincoln National (NYSE: LNC) subtracted $3.35 or 18.85% to end at $14.42. The firm posted a fourth-quarter net loss of $506 million, or $1.98 a share compared to a net income of $113 million, or 41 cents a share in the prior year quarter. On an operating basis, which excludes net realized investment gains and losses, Lincoln said it lost $122 million, or 48 cents a share, in the latest quarter.

Shares of Principal Financial (NYSE: PFG) sank $5.04 or 29.59% to $11.99.