Stocks slumped for a third straight session Friday, on worries that the White House’s bank plan and China’s lending curbs will mean a broader cutback in lending. Questions also arose over whether Fed Chairman Ben Bernanke’s term will be renewed.

Stocks were also vulnerable to a pullback after surging 3% in just over two weeks, with the major gauges having touched 16-month highs on Monday.

In the three day selloff, the stock market, as measured by the broad S&P 500, has lost 5%.

Wall Street had seen its worst day in months on Thursday, with all three major gauges ending in negative territory for the year. It was the second big down day in a row, with major gauges losing the 3% that had been gained in January.

Selling began Wednesday on reports that China has asked banks to slow the pace of lending this year in an attempt to get ahead of inflation.

“There’s still a lot of frustration with the big banks and I think there’s a belief that this (Obama) bank plan is not necessarily going to help investors,” said Gary Webb, CEO at Webb Financial Group.

He said that while the announcement indicates banks won’t be able to pass on any additional costs or fees to consumers, there’s a sense that they will find creative ways to pass the costs on anyway.

“I also think this is an emotional reaction to the news and that by next week, as people have processed it more, you’ll see stocks recovering,” Webb said.

(Source: CNN)