The Treasury’s plan to inject $250 billion in capital directly into US banks is underway. But William Patalon III says some of these taxpayer funds will be used by big banks to acquire junior competitors. This means the increase in lending that the plan is supposed to spark will be modest at best. And less competition in the banking sector could mean a rise in fees going forward.

Whiskey and Gunpowder editor Dan Amoss says the recent rally in financial stocks has more to do with short covering than regular buying.

Weak institutions were shorted so much that a bounce was inevitable.

Despite an SEC clampdown on shorting, Dan says legitimate shorting is vital for the stock market and is not to blame for the stategic mistakes of U.S. banks.

For those still looking for new short ideas in the sector, Dan says Allied Capital (NYSE:ALD) is a good place to start…