Nationalization, Bit By Bit

Whispers on the Street suggest Citigroup is on the brink of giving the U.S. government a larger stake in its business. And even if the government lacks voting control, the move could be the equivalent of a nationalization.

Although it’s purely speculation, investors liked what they heard. Shares of Citi surged higher. However, the move is not without critics. One highly followed analyst, Fox-Pitt Kelton’s David Trone wrote. "If Citi is nationalized, all bank stocks are likely to get crushed in fear."

The reasoning is -- the larger government stake could fuel speculation that Bank of America and other lenders might need similar agreements. If that happened, shares of other lenders could fall, including relatively healthy ones.

“(But) we’ve got to get the bad banks out of the system and clean them up and get the securitization market going again,” says former FDIC Chairman Bill Seidman on Fast Money.

In the coming weeks, the Treasury Department is expected to subject banks with more than $100 billion of assets to "stress tests" to decide which need capital.

Seidman has some ideas about how to clean up banks. Intrigued? Watch the video now!

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Trader disclosure: On Feb. 23rd, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders Najarian Owns (GE) Puts; Najarian Owns (GDX) & (GDX) Short Calls; Najarian Owns (HPQ) Calls; Najarian Owns (MSFT) & (MSFT) Short Calls; Najarian Owns (MS) & (MS) Short Calls; Najarian Owns (X) Put Spread; Najarian Owns (WFC) & (WFC) Calls; Seymour Owns (AA), (BAC), (EEM), (FXI); Seymour Is Short (NUE); Seymour's Firm Owns (PCU); Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Finerman's Firm Owns (WFC) Preferred; Finerman's Firm Owns (MSFT), (RIG); Finerman's Firm Is Short (IYR), (IJR), (MDX), (SPY), (BBT), (VNO)