WASHINGTON — In another unnerving day for Wall Street, investors suffered their worst losses since the terrorist attacks of 2001, and government officials raced to prevent the financial crisis from spreading.

Trading opened sharply down Monday morning, and the mood later turned even gloomier, despite efforts by President Bush and Treasury Secretary Henry M. Paulson Jr., in separate appearances at the White House, to reassure markets that Wall Street’s deepening problems would not weaken an already anemic economy.

Amid worries that the bankruptcy of Lehman Brothers and the sale of Merrill Lynch over the weekend might not be enough to stop the downward spiral, stocks fell sharply in the last half hour of trading. By the end of the day, the Dow Jones industrial average had dropped 504.48 points, or 4.4 percent, as a record volume of more than 8 billion shares traded hands on the New York Stock Exchange. It was the biggest decline since Sept. 17, 2001 — the day the index reopened after the 9/11 terrorist attacks — when it fell 7 percent, or 684.81 points.

A concern hanging over the market is the fate of other financial companies, most notably the American International Group, one of the world’s largest insurers. After the Fed rebuffed a request by the company for a $40 billion temporary loan, federal and state officials worked on Monday to stabilize A.I.G., with the State of New York relaxing rules to allow the company to borrow as much as $20 billion in much-needed cash, while the New York Federal Reserve Bank was engaged in talks with JPMorgan Chase and Goldman Sachs on a $75 billion loan for the insurer.