Will the U.S. government nationalize either Citigroup or Bank of America?

Investors Snap Up Debt Protection Amid Nationalization Fears
By Romy Varghese | Dow Jones Newswire | February 20, 2009

NEW YORK - Rampant speculation on bank nationalization gained momentum in the bond market Friday, sending the cost of protecting senior bank debt to record levels as sinking shares of financial institutions heightened concerns about their viability. While Citigroup Inc. (C) and Bank of America Corp. (BAC) featured prominently in the speculation, investors said the concerns were more broadly based about the financial system as a whole.

On Friday, a Citi spokeswoman said its capital base "is very strong," while Bank of America said it sees no reason to nationalize. Uncertainty over what nationalization would look like if the government decided to intervene in the still-troubled financial sector drove the selling of stocks and bonds and buying of credit protection. The cost of protecting senior debt of Citi, Bank of America and Wells Fargo & Co. (WFC) rose to record levels Friday. Meanwhile, bank hybrid debt has plummeted this week, as investors worry these securities, which blend features of both stocks and bonds, could be wiped out if there's a government intervention.

http://money.cnn.com/news/newsfeeds/articles/djf500/200902201200DOWJONESDJONLINE000757_FORTUNE5.htm

Here's our fresh analysis on this story: http://www.reuters.com/article/newsOne/idUSTRE51J6M420090221

U.S. Eyes Large Stake in Citigroup
Taxpayers Could Own Up to 40% of Bank's Common Stock, Diluting Value of Shares
By David Enrich & Monica Langley | Wall Street Journal | February 22, 2009

Citigroup Inc. is in talks with federal officials that could result in the U.S. government substantially expanding its ownership of the struggling bank, according to people familiar with the situation. While the discussions could fall apart, the government could wind up holding as much as 40% of Citigroup's common stock. Bank executives hope the stake will be closer to 25%, these people said.

Any such move would give federal officials far greater influence over one of the world's largest financial institutions. Citigroup has proposed the plan to its regulators. The Obama administration hasn't indicated if it supports the plan, according to people with knowledge of the talks.

http://online.wsj.com/article/SB123535148618845005.html

Would the US government taking a 40% stake in Citibank constitute "NATIONALIZATION" to the degree that this question could settle as YES?

lola - good question. i flagged and ask the admin to clarify what counts as "nationlize."

Although I wouldn't consider a 40% stake as nationalization, if there were statements from governmental officials or bank representatives that classified any action taken as a form or nationalization, I would consider that to count...so let's see what happens...I think I need a statement from one of those sources to classify it as nationalization

For the sake of settling, moderators should look to the WSJ and Economist for a discussion of how "preprivatization" = "nationalization." There are a lot of code words being bandied about in DC this month that equate to nationalization. However, that word is loaded with negative connotations. The settling article should make a clear case why "whatever term" either does NOT or DOES equate to the nationalization of X entity. For example the U.S. Government (and taxpayers) own 80% of AIG. There are discussions in DC about going ahead and dispensing with the production, taking over the remaining 20% (because it will happen eventually, or would be cheaper to do it quickly), and using AIG as the basis for government health care reform. Finding an article that calls that "nationalization" may not happen however. The moderators need to be savvy about this, interpreting what really happens, not getting caught up in what it's called.

jamal makes a good point on how politicans use words to make things sound differnt than they are. however the question does have the word "nationalize" in it so i would think it has to be used to settle the question. bernke was asked about it and he said he'd call it a "private partnership." whatever one chooses to call it imho if the govt buys 51% of the stock they become the majority owner. goodluck to those who have wagers in this market.

"I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."
Thomas Jefferson, (Attributed)