) -- As the end of 2010 nears, financial stocks this week got a boost from the government's further decoupling from


(AIG) - Get Report

and regional banks. This week also saw the beginnings of consolidation in the bank sector, despite further clarification on debit interchange fees.


Financial Select SPDR

(XLF) - Get Report

is up more than 7% this month, even after losing approximately 2% over the previous week.



(MA) - Get Report



(V) - Get Report

shares got trounced late in the week after the

Federal Reserve

published two competing proposals for setting

debit interchange fees


Investors got spooked because the proposed fee cuts are higher than expected, even though the payments networks have little direct exposure to interchange fees. In addition, analysts said there was little clarity in the proposals regarding the network exclusivity arrangements that legislators are seeking to limit.

Still, analysts, for the most part, say the stocks should be bought, given strong long-term growth trends in the payments industry.

It looks as though the much-talked about

bank consolidation

wave is starting.

> > Bull or Bear? Vote in Our Poll

On Friday,

Marshall & Ilsley (MI)

agreed to be acquired by the

Bank of Montreal

(BMO) - Get Report

for $4.1 billion in an all-stock deal. The deal price represents a 35% premium to M&I's closing stock price on Thursday, but it is still technically a take-under because it is only 0.98 times the company's tangible book value, one analyst said.

The news of the acquisition pushed up shares of other regional banks that could be takeover targets, including

SunTrust Banks

(STI) - Get Report


Regions Financial

(RF) - Get Report


Earlier in the week shares of



BankAtlantic Bancorp (BBX) - Get Report

surged on speculation that

PNC Financial Services

(PNC) - Get Report

had been sniffing around banks in Florida.

BankAtlantic's CEO said that the company, despite wanting to remain independent, was "open to opportunities."

The news of bank consolidation coincides with more banks looking to repurchase preferred stock owned by the U.S. Treasury Department under the Troubled Asset Relief Program. This week

Huntington Bancshares

(HBAN) - Get Report


First Horizon

(FHN) - Get Report

announced capital raises that are efforts to repay TARP.


Bank of America

(BAC) - Get Report

once again found itself in the news this week. The Charlotte-based bank is reportedly in settlement discussion talks with several investors over mortgage putbacks.

At the same time,


, sort of like an annoying bug bite that won't go away, reasserted Friday that it does indeed plan to release damaging information about at least one major bank, which some have thought to be BofA.

And as a reminder, just because it's a holiday next week doesn't mean the news stops.

The Street's Weekly Financial Recap

will be published as usual next Saturday.

-- Written by Laurie Kulikowski in New York.

To contact the writer of this article, click here:

Laurie Kulikowski


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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.