Bank stocks fell Tuesday as investors took back some gains from Monday's rally, one of the strongest in months.

The KBW Bank Index fell 7.25%, after soaring 18.59% Monday on the long-awaited release of the Treasury's public-private partnership plan for buying banks' bad assets.

Likewise, the Dow Jones industrial average fell 1.49%, and the Standard & Poor's 500 index 2.01% after their big Monday run-up.

"The average bank share price rose about 15% yesterday, so there was some profit-taking today," James Bradshaw, an analyst at Bridge City Capital LLC in Portland, Ore., said on Tuesday. "Plus, we're a little addicted to good news, so if there's no good news coming out, everything sells off a little bit.

Cassandra Toroian, the president and chief investment officer of Bell Rock Capital LLC in Rehoboth, Del., said that investors are also digesting all the recent moves in Washington, including the likely impact of the Treasury Department's new toxic-asset purchase plan, and legislation to tax bonuses prompted by the recent flap over $165 million in bonuses paid this month to American International Group Inc. traders in the London unit whose products brought the giant insurer down.

"For the institutions that took Tarp money, the bonus legislation is just a symptom of a greater problem — which is whether to have the government 'wild card' in their business," Toroian said.

JPMorgan Chase & Co. fell 8.8%; Bank of America Corp. 7.2%; Citigroup Inc. 13 cents, to $3; Wells Fargo & Co. 10.3%, and U.S. Bancorp 6.9%.

Among the regionals, SunTrust Banks Inc. was off 8.4%; Regions Financial Corp. 1 cent, to $4.49; Fifth Third Bancorp 19 cents, to $2.19; PNC Financial Services Group Inc. 2%; Marshall & Ilsley Corp. 9.4%; First Horizon National Corp. 4.9%, and Huntington Bancshares Inc. 33 cents, to $1.76.

On Tuesday, both Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke told members of the House Financial Services Committee that the government needs the authority to close troubled nonbank financial companies like AIG.

Geithner also told lawmakers that, though it would be "difficult" to ask Congress for more money to bail out banks, the Obama administration would do so if necessary.

U.S. Bancorp in Minneapolis signed a deal with Western Union Co. of Englewood, Colo., to allow the latter to offer its money transfer services in U.S. Bank branches. The bank would start offering the services in May and is developing the ability to offer Western Union's services to customers on the bank's Web site.

Frontier Financial Corp.'s stock fell 14 cents, to $1.35. The $4.1 billion-asset Everett, Wash., company said Tuesday that regulators had ordered its bank subsidiary to boost its capital.

Under a cease-and-desist order with the Federal Deposit Insurance Corp. and the Washington State Department of Financial Institutions, Frontier Bank also agreed to strengthen management, change its lending policies, increase board oversight and improve the loan portfolio.

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