Washington- US stocks plummeted as markets opened Friday over the impasse in the 700-billion-dollar financial rescue plan in the nation's capital and the collapse of Washington Mutual Inc, in the largest bank failure in US history.

At the 9:42 am shortly after the opening of New York markets, the S&P 500 broad-based index sank 18.42 points, or 1.5 per cent, to 1,190.76. The blue chip Dow Jones Industrial Average declined 132.61, or 1.2 per cent, to 10,889.45. The high tech Nasdaq Composite Index dropped 38.48, or 1.8 per cent, to 2,148.09.

A customer-run on accounts since September 16 for 16.7 billion dollars in cash withdrawals from Washington Mutual (WaMu) forced the US government bank oversight agency to declare it "unsound," the Office of Thrift Supervision said late Thursday.

After federal regulators shut down the bank, WaMu's deposit accounts were immediately purchased by banking giant JP Morgan Chase & Co for 1.9 billion dollars, guaranteeing that no depositors would lose money.

WaMu, based in Seattle, Washington, collapsed when its credit rating was downgraded to junk status late Wednesday, bringing action by the Federal Deposit Insurance Corporation (FDIC), a government agency that insures bank accounts up to 100,000 dollars.

JP Morgan is only buying WaMu's consumer deposits, leaving the thrift liabilities to the FDIC to resolve. WaMu had lost a reported 19 billion dollars on bad mortgage loans, amid the ongoing Wall Street crisis stemming from mortgage securities.

On the stalled financial rescue package out of Washington, US President George W Bush sought to reassure investors Friday by saying he was optimistic and determined that a 700-billion-dollar US government rescue plan for Wall Street would pass Congress.

Members of his own Republican Party in the House of Representatives are holding up the plan while they reportedly are fashioning an alternative proposal.

Bush has warned that failure by Congress to act within days could lead to a "long and painful recession."

On Friday, Bush said: "We are going to get a package passed. We will rise to the occasion. Republicans and Democrats will come together and pass a substantial rescue plan."

Credit has frozen around the country amidst massive losses from bad mortgage debt and related high-risk securities. The bailout would be the largest intervention in capital markets by the US government in history. (dpa)