Financial stocks fell sharply Monday in New York as the sector gave up some of the ground it won late last week.

The Amex Securities Broker/Dealer index was dropping 9.9%, and the NYSE Financial Sector index was off 6.5%. The KBW Bank index was lower by 9.5%.

Among individual stocks,

Bank of America

(BAC) - Get Report

was down 7.8%, and

Wells Fargo

(WFC) - Get Report

was sliding almost 13%.

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Goldman Sachs

(GS) - Get Report

, which along with

Morgan Stanley

(MS) - Get Report

said this weekend that it would adopt a bank holding company structure, was losing 6%.

Morgan Stanley

was in positive territory, adding 2.5%.

Sandler O'Neill downgraded 22 banking companies, including Wells Fargo,

BB&T

(BBT) - Get Report

,

PNC

(PNC) - Get Report

and

JPMorgan Chase

(JPM) - Get Report

, primarily because of "the group's extraordinary rebound, coupled with our sense that fundamentals remain extremely challenged and valuations have now gotten ahead of themselves," the firm said in an industry report.

Within the report, Sandler O'Neill detailed the effects of a potential

government bailout

, limiting

short-selling

and the likely need for more capital raises by banks.

National City

(NCC)

was giving back 5.5% despite an upgrade at Goldman to buy from neutral. The firm raised its price target on National City to $7 from $5.

One of the few winners for the day was

AIG

(AIG) - Get Report

, which benefited from reports that some big investors are trying to find an alternative to the current proposal by the

Federal Reserve

that would result in the government owning about 80% of the insurer. Shares of

AIG

were jumping 28%.

Citigroup

(C) - Get Report

was also in the news, as

The Wall Street Journal

said that Sallie Krawcheck, who runs the bank's wealth-management division, is probably going to leave the company. The report cited people who had knowledge of the situation. Citi slipped 2.7%.

This article was written by a staff member of TheStreet.com.