NEW YORK (Fortune) -- Treasury Secretary Tim Geithner defended his financial stabilization plan Tuesday, telling senators it is "fundamentally different" than the one pursued by his predecessor, Henry Paulson.

Testifying before the Senate Banking Committee, Geithner conceded that the plan he outlined Tuesday morning lacked some details, including how much it might cost and how much additional funding might be necessary beyond what's available under previous congressional authorizations.

But even without those sorts of details, Geithner said he felt it important to "lay out the broad architecture of what we need to do."

The comments came after financial stocks plunged Tuesday. The KBW Bank Index plummeted 14%, wiping out the past week's rally. Big banks Citigroup (C, Fortune 500), Bank of America (BAC, Fortune 500), Wells Fargo (WFC, Fortune 500) and Morgan Stanley (MS, Fortune 500) each dropped at least 10%.

Investors had hoped to see a plan that would address two of the biggest problems in the banking sector: the toxic assets keeping banks from lending, and the shortage of capital at major institutions at a time when losses are expected to rise sharply.

While Geithner pledged to raise as much as $500 billion from public and private sources to relieve banks of toxic assets, he didn't explain how the program would bring together buyers and sellers who have been locked in a stalemate for 18 months.

In response to a question from Sen. Mike Crapo, R-Idaho, Geithner said the administration intends to provide longer-term financing that has been absent during the credit crisis. The presence of stable financing could allow investors to accept lower returns in exchange for greater leverage, which magnifies returns.

And while he pledged to provide "capital support" for banks that need more money, skeptics note that Treasury has just over $100 billion available for capital infusions -- which surely won't be enough to tide over an industry facing losses that could reach into the trillions of dollars.

Promise to spend money wisely

Asked about the size of the problem facing the financial sector, Geithner declined to project how much money he might need but said he wanted to be "candid" about the rising costs of the bailout.

Treasury has $320 billion available under the Paulson-era Troubled Asset Relief Program, though Tuesday's plan earmarked more than half of that for lending and housing programs.

"I think this is going to be a substantial problem for the nation that will require substantial resources," Geithner said Tuesday afternoon in response to a question from the committee's ranking member, Sen. Richard Shelby, R-Ala. "We will move to use existing resources as efficiently as possible."

Asked by Sen. Jim Bunning, R-Ky., to specify how much money the administration would need to solve the financial crisis, Geithner reiterated his promise to spend whatever resources Treasury has at its disposal wisely.

"At this point we do not have a judgment about whether and how much additional resources we will need to solve this," Geithner said.

Though Geithner's vagueness may not help him win over critics, he has stressed that his plan isn't in danger of turning into a rerun of the troubled Paulson plan.

"You need to change the basic public perception around how this is going to be managed by bringing a new set of values and sense of responsibility," Geithner told Fortune in an interview Monday. "These banks need to understand that access to government resources is a privilege, not a right. It's not for the banks. It's for the people, and companies depend on that."

Nobody liked the old TARP

The original TARP has drawn scorching criticism from both sides of the aisle in Congress for its failure to lay out clear goals, account for how taxpayer funds were spent or demand adequate compensation for taxpayers.

The Congressional Oversight Panel appointed by the Senate reported last week that the Paulson Treasury paid $254 billion in 2008 capital purchases for stock and warrants that were worth just $176 billion.

What's more, Paulson sold Congress last fall on a plan to solve the toxic asset problem -- and then changed his mind without telling anyone until weeks later. That is one reason why lawmakers were so insistent on hearing more details from Geithner before committing to support his approach.

"I've been down that road before," said Sen. Robert Menendez, D-N.J. "We're not going there again."

Geithner said that while there are "common elements" to his and Paulson's approaches, he promised to impose more transparency and tougher conditions on recipients of federal funds.

"The path we have taken to date was too limited," he told the Senate Tuesday..

Though observers agree with Geithner's assessment of the Paulson regime, some wonder whether he's falling into a similar trap - promising clarity and then not delivering.

"Geithner was right that they screwed up before," said Simon Johnson, a finance professor at MIT who writes the Baseline Scenario blog covering the financial crisis. "But why should we trust him now?"



