Once mortgage-backed securities write-offs began to drop, earnings at American banks were supposed to get better. In 2009, There was actually some hope that earnings in the sector might get better, even if it was only by a modest amount. But, the news over the last several days has been grim and bank stocks are moving back to multi-year lows.

There has been a perception that one of the large financial firms that would be better than OK was Bank of America (NYSE:BAC). It had the balance sheet to takeover Countrywide and Merrill Lynch. With the revenue from those companies and all the cost cuts BAC could make by putting the operations together, it would be more than fine. It would be the next large world financial supermarket.

The vision of Bank of America as a successful enterprise has taken a turn for the worse, and the government may end up owning more of the company than it would like to. According to The Wall Street Journal, "The U.S. government is close to finalizing a deal that would give billions in additional aid to Bank of America Corp. to help it close its acquisition of Merrill Lynch & Co." The acquisition was not supposed to require any outside capital at all.

Wall St. is now left with the question of how many more shoes are left to be dropped. The $350 billion left in the TARP fund is supposed to go to helping the mortgage market. At least that is how many members of Congress see it.

But, some reasonable portion of the fund may not go where it was planned. Big banks may need to siphon off more than anyone in the federal government could have imagined.

Douglas A. McIntyre is an editor at 247wallst.com