How the Fed is Killing S&Ls, and Why You Should Care

Savings and loans — those much-vilified institutions since the crisis of more than 20 years ago — finally may have met their maker, and that could be a bad thing for consumers.

Last week's Federal Reserve announcement that S&Ls would have to increase their capital requirements could doom an industry that has been able to thrive largely on its ability to lend large amounts of money, primarily through mortgages, while keeping relatively low capital.

The changes are part of the new regulatory landscape that has come about in response to the 2008 financial crisis.

While the good news is that mega-failures like Washington Mutual, which was sold to JPMorgan Chase [JPM  32.82    -0.86  (-2.55%)   ] during the crisis, are taken out of play, the bad news is that consumers may feel the pain of mortgage rates that start rising off record lows.

"We believe that regulatory changes following the financial crisis, including the announcement of thrift capital requirement last week, have ended the viability of the thrift industry," strategists at financial services firm Keefe, Bruyette & Woods said in a research note.

"Bank mortgage lenders will need to carry higher capital against mortgage loans, demanding higher returns," KBW continued. "Higher capital requirements will not support the revitalization of the thrift industry, in our opinion, and as a result the industry will continue to fade away."

Read more: http://www.cnbc.com//id/47766439