These assets sales will put more pressure on the mortgage market as new supplies of mortgage backed securities or loans get dumped on already reluctant buyers. That forces up mortgage interest rates in a market that already is struggling. The housing market doesn't need any more bad news, especially with the first-time buyer tax incentive about to expire.

With a sale, there are fewer assets working for a bank. That means lower income to the bank which means lower earnings per share. Investors never like that.

Another way to raise capital: sell equity. Right now most bank stocks are selling below book value. Bank of America sells for .75 of book; Citi goes for .32. Wells, Fargo is an exception at 1.56, but it hasn't had as many write-offs as the other 2. When a stock sells below book value, new stock being issued dilutes the current shareholders. If the book value of a stock is $10 and the stock is selling for $7.50, then new stock will be sold at the $7.50 level, bringing down the book value below $10. So current shareholders lose money. Investors don't like that either.

Of course, there are other types of capital that can be used such as convertible bonds or convertible preferred stock or even subordinated debt. But all of these come at a very high price in today's market. And anything convertible into common stock will most likely be dilutive so it only stalls the inevitable dilution rather than curing it.

This new capital rule may only be "suggested" by the Fed regulators rather than overtly mandated. Either way, investors will feel the consequences. It makes sense to have a stronger banking industry following the worst meltdown since the run on banks in the 30's. One could argue that it's the best thing for investors in the long run. But in the short run, there could be large amounts of assets for sale, some at distressed prices, some at losses. Banks may shrink.

The landscape is changing for banks. The Fed is very aware of the fragility of the banking industry. It won't do anything that will make bank survival even more difficult. It knows raising equity is extremely hard. It knows sales of assets will put undue pressure on the mortgage markets. But it also knows that its first responsibility is to maintain trust in banks. One way it can do that is to lower banks' ability to leverage their equity. It also knows that an extra cushion of safety is always wise.

Only the best banks will survive these challenging times. There will be more closures, more takeovers. But the smartest and best managed ones will survive and thrive as adversity always creates opportunity. If you want to own bank stocks, focus on the ones that have already proven their management mettle over the last year by growing their banks profitably, rather than shrinking them. But be aware that new rules may be coming that will affect all banks, no matter how capable the management is.