"Americans disdain to see their economy fall to Reaganesque lassez faire-ism. They openly declare, through their representatives that economic recovery can only be achieved by a strong government role which creates more jobs, increases health care coverage, and stops banks from losing million's life savings. Let the Republicans tremble at an Obama revolution which will put Reaganism on the dust bin of history, and create a sound and sustainable economy. Americans have nothing to lose but the GOP's outmoded, outdated, and failed policies. They have a future to win. Liberals of the world, UNITE"

Citi and other banks believe this will result in more confidence from the equity markets, i.e. other private investors may invest/provide capital and the stock price will rise.

Private investors are not going to buy equity of troubled banks, i.e. provide capital, when there is talk of things like nationalization or government takeover of banks. Private investors don't want to invest in equity, and then get wiped out by government takeover or nationalization.

But, rather than using it as a threat to banks, I think they should begin to explain to the people why this is necessary.

The argument is pretty simple:  "If the people's money is going to be used to save the banks, then the people need control and an equity stake."

Obviously they will need to find a conversion rate that still makes the government look good politically while preventing such terrible dilution that would make the rate bickering meaningless.

While turning preferred stock into voting common stock would be a step towards nationalization, especially if the amount of common is a controlling interest, the full statement reiterates their desire to keep the banks private.  In addition, the statement makes it clear that the injection of capital in the form of common stock is meant to be temporary.

So rather than being seen as something Bolshevik, nationalization is seen as pragmatic. Paradoxically, the proposal is more market-friendly than the alternative of zombie banks."

And,

So, will the highest level of government be receptive to the bank-nationalization idea? "I think it will," Mr. Roubini says, unhesitatingly. "People like Graham and Greenspan have already given their explicit blessing. This gives Obama cover." And how long will it be before the administration goes in formally for nationalization? "I think that we're going to see the policy adopted in the next few months . . . in six months or so."

That long? I ask. "Six months from now," he replies, "even firms that today look solvent are going to look insolvent. Most of the major banks -- almost all of them -- are going to look insolvent. In which case, if you take them all over all at once, you cause less damage than if you would if you took over a couple now, and created so much confusion and panic and nervousness.