The TSX fell by as much as 1,180 points to a session low of 9617 in its worst single day point decline in history. "The logic is worries of a global recession. The extent of the carnage is unreasonable," said Carlos Leitao, chief strategist and economist at Laurentian Bank. At its lows, it marked the largest percentage decline since an 11.3% decline on Oct. 27, 1987, a day known as Black Monday.

South of the border, the Dow Jones industrial average tumbled more than 300 points on Monday and is now trading below 10,000 for the first time since 2004. The sell-off was blamed on global economic worries and signs of the crisis spreading to Europe.

European stock markets didn't fare much better, with the Eurostoxx closing down 202 points, the UK FTSE 100 down 363 points and the German DAX closing down 410 points.

In a bid to reestablish credit markets and buoy the economy, the Federal Reserve announced on Monday that it will increase the size of term facility auctions and that it will begin paying interest on required and excess bank reserves. "Paying interest on required reserve balances should essentially eliminate the opportunity cost of holding required reserves, promoting efficiency in the banking sector," the Fed said.

In an effort to address the funding needs of the Emergency Economic Stabilization Act on Friday, the U.S. Treasury announced that it plans to make adjustments to its auctions calendar. The Treasury plans to announce the terms of the changes at its quarterly refunding announcement on Nov. 5.

Speaking later in an interview with CNBC, U.S. Under Secretary for Domestic Finance Anthony Ryan said progress is being made on structuring the facilities geared at allowing the Treasury to acquire illiquid assets from financial institutions.

Speaking at a conference on financial market supervision in New York, former Federal Reserve Chairman Paul Volcker said the U.S. Federal Reserve is taking the appropriate measures to support the great pressures that the financial system is currently experiencing.

In terms of data releases, it was a quiet morning, with Canada's Ivey Purchasing Managers Index for September surprising to the upside, coming in at a reading of 61 against forecasts for a decline to 51. The Ivey Employment Index for September fell to 49.2 from its August reading of 53.0 and inventories slid to 50.8 from the previous month's 55.6. Supplier deliveries were 44.6, a decline from August's 55.6, and prices climbed to 74.6 from 72.7 in August.

In developments overseas, the German government issued a guarantee on every private deposit account as part of its plan to avert a disastrous outcome from the banking crisis. Speaking to reporters on Sunday, finance ministry spokesperson Torsten Albig said "the state guarantees private deposits in Germany." A new bailout agreement was also reached to save German lender Hypo Real Estate (HRE). The German government, along with a consortium of banks, came to a €50 billion deal after an earlier plan was aborted.

According to a recent announcement by Belgium Prime Minister Yves Leterme and a report today from Belgian newspaper De Tijd, an agreement has been made for French banking group BNP Paribas to buy the remaining assets of financial group Fortis.

Europe's financial system is "more solid" than that of the U.S., Luxembourg Finance Minister and Eurogroup chairman Jean-Claude Juncker said, adding that the situations that both systems are facing cannot be compared. In an interview with Luxembourg newspaper Wort published on Monday, Juncker also said the European Union's big four economies "agreed that they won't let any of their banks go bankrupt."

A number of European speakers also delivered comments, including UK Chancellor of the Exchequer Alistair Darling who said the British government will take all necessary measures to ensure the stability of the banking system. It is important to examine all options, including liquidity capital and regulation in conjunction with other countries, said Darling, who plans to introduce new legislation on the banking system on Tuesday.

Luxembourg Budget Minister Luc Frieden said that everything would be done to revive confidence in the financial system. The lawmaker confirmed that Dexia bank, which had received an $8.7 billion lifeline last week, was indeed being restructured, but said he does not know what France has in store for the firm.

By Stephen Huebl, This email address is being protected from spam bots, you need Javascript enabled to view it , with contributions from Erik Kevin Franco, This email address is being protected from spam bots, you need Javascript enabled to view it , Adam Button, This email address is being protected from spam bots, you need Javascript enabled to view it and Todd Wailoo, twailoo@economicnews, edited by Nancy Girgis, This email address is being protected from spam bots, you need Javascript enabled to view it

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