U.S. common stock ownership may be some banks' last resort

As banks receive their stress test results, some are finding that their only choice for survival could be converting TARP preferred shares to common shares, similar to what Citigroup (C) was forced to do. While banks were given three options -- sell shares, convert shares, or get more federal aid -- in reality, only one option truly exists if the stress tests show a bank needs to improve its capital position.

Banks likely won't have the option to sell shares because who would buy shares in a bank showing shaky results of the stress test? While it may be possible to find a cheap price investors would consider, it may not be any better than the conversion of the TARP preferred shares.