Bank nationalization takes place when a government takes over a failing institution. This usually includes removal of the management, buying out the stockholders and reselling the bank.Reuters: Sen. Graham says bank nationalization an option (February 18, 2009)

On February 20, 2009, Democratic Senator Charles Schumer indicated that he was in favor of bank nationalization for failed institutions. Claiming that the move should only be used as a last resort, if the bank met the conditions set forth by Treasury Secretary Timothy Geithner.Huffington Post: Schumer: Failed 'Zombie' Banks Should be Nationalized(February 20, 2009)

During the first few months of 2009, fears that the worsening economic condition would force the U.S. government into buying failed banks surfaced.CNN Money: In praise of nationalizing banks (February 17, 2009) Though Senate Banking Committee Chairman Christopher Dodd has suggested that such a fix may be necessary, White House press secretary Robert Gibbs has suggested that President Barack Obama wants to maintain a privately-owned baking system.MarketWatch: White House says it backs 'privately held' banking system (February 20, 2009)

At present, the Obama administration, like the Bush administration in the fall of 2008, has supported the injection of money into the banks, rather than outright buying them. However, capital injection allows the current bank's management to oversee the expenditure of the funds, a condition that has become problematic as the banks have refused to discuss how they are spending those funds, or provide any transparency at all. Further, the injection of capital—$94 billion to Bank of America and Citigroup combined—has not in fact stabilized those banks.Reuters: Sen. Graham says bank nationalization an option (February 18, 2009)

Nationalizing banks is associated historically with socialism, and is dreaded in a country which has been so strenuously free market. Arguments against the nationalization of banks are that the people who run the banks today are better able to run the banks than Washington bureaucrats; and that government run operations would stifle creativity.CNN Money: In praise of nationalizing banks (February 17, 2009)

Those who support nationalization point to Japan, who in the 1990s tried many of the same steps the U.S. is trying today. The economic problems ran unchecked for a decade, and it wasn't until 2002 that things got better, after the Japanese government ordered a strict audit of the top banks. When the full truth of the damage was known, the government nationalized the banks. It took another three years before most of the bad loans were written off.New York Times: In Japan’s Stagnant Decade, Cautionary Tales for America (February 12, 2009)

• Wikipedia: Nationalization
• Reuters: Sen. Graham says bank nationalization an option (February 18, 2009)
• Yahoo! News: Stress testing "nationalization" (February 18, 2009)
• CNN Money: In praise of nationalizing banks (February 17, 2009)
• The Hill: Bank nationalization would test Obama (February 19, 2009)
• Marginal Revolution: Free Market Bank Nationalization (February 17, 2009)
• New York Times: Rescue of Banks Hints at Nationalization (January 15, 2009)

1. New York Times: In Japan's Stagnant Decade, Cautionary Tales for America (February 12, 2009)