Last week's speculation that Citigroup and Bank of America would be nationalized really hammered the market, prompting White press secretary Robert Gibbs to come out and say the administration will not go that way. "This administration continues to strongly believe that a privately held banking system is the correct way to go, ensuring that they are regulated sufficiently by this government. That's been our belief for quite some time, and we continue to have that."

Citigroup however seems to have other ideas with The Wall Street Journal reporting that the bank is talking with Federal officials about the US government taking over as much as 40%. That's the biggest slice of equity since the US Government took on 80% of insurance giant American International Group last year.

For its part, the Obama administration is talking about creating a "stress test" for banks undergoing a financial rescue. That test would assess whether they would have enough capital necessary to continue lending and to absorb more losses.

So what to make of this? It's not clear whether this has been leaked to the WSJ as a way of throwing a dead cat on the road and seeing the reaction. One thing for sure. If part-nationalization goes ahead, it will just be the beginning. Other banks will be lining up for similar deals.