(Updated with final stock price moves throughout.)

NEW YORK (

TheStreet

) --

Citigroup

(C) - Get Report

was among the biggest decliners of the financial sector Tuesday, even after the bank said it approved $6 billion in new lending initiatives during the second quarter.

In its second-quarter progress report as part of the Troubled Asset Relief Program,

Citigroup said it approved $6 billion in new initiatives during the quarter. That brings the bank's total value of approved programs supported by TARP capital to $50.8 billion, Citigroup said, adding that at the close of the second quarter, it has put to work about a third of that total.

Citigroup shares finished lower by 25 cents, or 6.4%, at $3.69.

Elsewhere, U.S. District Judge Jed Rakoff said Monday he needs more information before he can approve the $33 million settlement between

Bank of America

(BAC) - Get Report

and the

Securities and Exchange Commission

.

Last week, the SEC charged BofA with making "materially false and misleading statements" in connection with its acquisition of Merrill Lynch. Without admitting or denying guilt, BofA agreed to settle charges that it misled investors about Merrill Lynch's bonus payment plans.

"I am concerned that we have not yet ferreted out all that the court needs to know," Judge Rakoff said at a hearing in New York Monday. Adding that he is looking for "the truth, not the spin," Rakoff ordered both sides to provide additional details to the court within the next two weeks.

In a research note Tuesday, Rochdale Securities analyst Richard Bove said the judge's interference sends two separate messages. The first is that the judge intends to get involved in how the company is run. The second is that the judge is clearly dismayed by that agency's lack of transparency. Neither message bodes well for stocks in general, nor Bank of America specifically, Bove wrote.

"The point to the SEC is that it will no longer be able to operate in secrecy. It must justify its actions," Bove wrote. "Perhaps a second point here is that the SEC should be activist and not let companies slide by with miniscule fines for great misdeeds. This aspect of this case is likely to be more important in the long run than the issues related to Bank of America."

BofA shares finished down 83 cents, or 5%, at $15.85.

In a separate research note, Bove argued that the recent rise in bank stocks does not appear to be driven by a change in the near-term earnings outlook, and that it may be time to book some short-term profits.

"

The recent rise in bank stocks has been driven by a change in psychology. Thus, it is our belief that these stocks are trading on 'fumes' and not reality," Bove wrote. "Therefore, we expect a short-term pullback in prices. Our long-term view that this industry is attractive remains unchanged."

Wells Fargo

(WFC) - Get Report

lost 6.1% to fall to $26.89,

JPMorgan Chase

(JPM) - Get Report

was off 3.4% to close at $41.24,

Morgan Stanley

(MS) - Get Report

slid 3.1% to $29.89, and

Goldman Sachs

(GS) - Get Report

dipped 0.7% to $159.22.

Turning to analyst moves, JPMorgan downgraded bond insurer

MBIA

(MBI) - Get Report

to underweight from neutral, arguing that losses stemming from collateralized debt obligations (CDO), residential mortgage-backed securities (RMBS) and commercial mortgage-backed securities (CMBS) will ultimately overwhelm capital.

MBIA shares plummeted 78 cents, or 12.6%, to $5.39 following the downgrade. Fellow bond insurer

Ambac Financial

(ABK)

traded lower in sympathy, ending down 9.4%.

Among other laggards in the sector, shares of embattled lender

CIT Group

(CIT) - Get Report

sank after he company delayed the filing of its second-quarter earnings report. CIT, which last month arranged $3 billion in financing from bondholders after being denied government assistance, said it is still considering which assets it may have to sell to raise money, warning that it may yet file for bankruptcy.

CIT shares tumbled 28 cents, or 18.9%, to close at $1.20.

--

Written by Robert Holmes in New York

.