The Obama administration, which says it doesn’t want to nationalize U.S. banks, may find itself taking another step in that direction if it converts the governments preferred shares in Citigroup Inc. into common equity to help the firm withstand losses.  Citigroup and rival Bank of America Corp are among more than 20 lenders that could wind up majority-owned by the government if such conversions took place.  U.S. regulators led by the Treasury Department announced today that the government stands ready to take bigger bank stakes in the form of shares that would be converted only as needed over time.  Some analysts already believe nationalization of some of the nation’s largest lenders appears to be well under way since the government already holds $52 billion of preferred shares in Citigroup, five times the bank’s market value as of Feb. 20.  The problem is that the government is dancing around this nationalization issue. They do not want to do it.  Senate Banking Committee Chairman Christopher Dodd said in a Feb. 20 interview with Bloomberg Television that “short- term” government takeovers may be unavoidable.  Nationalization may be the only way out, since losses are just going to keep accelerate in the next couple of quarters. The holes in these banks are just too big.  Since the majority of outside financial investors are way too leery of buying bad mortgage notes and possibly getting stuck with them; a U.S. Government nationalize bank whose primary purpose is to buy up those bad mortgages, (freeing lending institutions to start lending again here in Las Vegas and other hard hit areas of our nation), and hold, manage and gradually liquidate them may be the only answer to this crisis.

By Linda Shen