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) --

Zions Bancorporation

(ZION) - Get Free Report

was the loser on a rough Wednesday for U.S. financials, with shares declining 6% to close at $14.75.

The market's three-day rally came to an end, as the broad indexes saw 2% declines, with investors continuing to fret over European bailout discussions. Financials fared even worse, as the

KBW Bank Index


was down 3.5% to close at 35.56, with all 24 index components showing significant declines.

Shares of

Morgan Stanley

(MS) - Get Free Report

were down over 5% to close at $14.17. SNL Financial reported that the company's Morgan Stanley Capital Holdings subsidiary agreed to pay $7.2 million "to resolve an investigation into the company's role in buying and securitizing about 3,000 subprime mortgages in Nevada."

Bank of America

(BAC) - Get Free Report

was down 5% to close at $6.16, after a

New York Times

DealBook report that a $50 billion class-action lawsuit against the nation's largest bank, claiming that former CEO Ken Lewis failed to disclose the size of Merrill Lynch's losses before shareholders approved the BAC-Merrill merger was "on a relatively fast track, with an October 2012 trial date.

A Bank of America spokesman said ""there's absolutely nothing new in this article, which omits many important facts, about a matter that has been in litigation for some time. We continue to vigorously defend ourselves against these actions."

Regions Financial

(RF) - Get Free Report

was also down 5% to close at $3.44. Reuters reported that as Regions tries to sell its Morgan Keegan unit, several recruiters with other companies said there could be an "exodus of advisers at the Memphis-based brokerage firm."

Large banks seeing shares decline 4% on Wednesday included


(C) - Get Free Report

, closing at $25.92;

Cullen/Frost Bankers

(CFR) - Get Free Report

, at $45.64;

Capital One

(COF) - Get Free Report

, at $40.94;


(KEY) - Get Free Report

, at $5.80;

New York Community Bancorp

( NYB), at $11.81;


(STI) - Get Free Report

, at $18.03; and

State Street

(STT) - Get Free Report

, which closed at $32.23.


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Written by Philip van Doorn in Jupiter, Fla.

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Philip van Doorn


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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.