Renowned currency trader Jim Rogers has blasted the US government's planned bail-out of Fannie Mae and Freddie Mac as an "unmitigated disaster".
His former trading partner, hedge fund guru George Soros, warned that the banks would not be the last victims in the "most serious financial crisis of our lifetime".
News of the bail-out sent the shares of the two banks up as much as 20pc in early trading, but the gains were quickly eroded as investors feared the possibility of another collapse in the regional banking sector.
The Dow Jones Industrial Average was down 97 points at one stage and, by lunchtime on Wall Street, Fannie Mae was down 55 cents at $9.70, while Freddie Mac was off 84 cents at $6.91.
The price falls came despite strong demand for a $3bn debt sale by Freddie Mac, the first test of the company's borrowing ability since last week's dramatic share price falls.
Reaction to the Treasury and the Federal Reserve's bail-out plan was mixed but Mr Rogers was the most vocal. He argued that Fannie and Freddie, America's largest mortgage finance companies which own or guarantee some $5 trillion of mortgage debt, are "basically insolvent".
He said: "I don't know where these guys get the audacity to take out money, taxpayer money, and buy stock in Fannie Mae." He added that the US government should instead have allowed Fannie and Freddie to go bankrupt.
Mr Soros said the dollar remained vulnerable as a result of the government's actions to increase its own already sizeable debt pile.
Investors pointed to regional bank National City as the next possible victim as its shares fell 27pc in early trading, despite assurances from the Ohio-based bank.
It followed the Federal Deposit Insurance Corporation's seizure of California's IndyMac Bank on Friday, the second largest failure of a US bank. IndyMac reopened yesterday under FDIC control, with borrowers queuing to withdraw cash at many of its 33 branches .
