It’s been swirling around both Main Street and Wall Street for several weeks now, but as each day passes the rumors of the nationalization of some of the largest financial institutions grows even stronger. Continually we have rumors breaking out of the nationalization of banks and then White House spokesman Robert Gibbs continually tells reporters that the Obama administration strongly believes a “privately held banking system is the correct way to go.”

The fact that we are even having to have a discussion about whether nationalization of our nation’s largest banks is healthy or not is a case in point as to how terrible things have gotten for the economy over the past year. These once seemingly unbreakable banks are falling apart in front of our eyes. The financial health of the entire industry is at stake here, but there truly are no easy answers to how we fix the problem.

Nationalization of the banks is a very touchy subject and for good reason. If the banks would be nationalized the fear is that politicians and anyone in the government would have access to allocate bank capital in any way that they wish. As most Americans know, politicians in all parties tend to worry first and foremost about getting elected, which could be highly detrimental to the capital position of the bank as it is controlled by the government. Nationalization of the banks may sound like a great way to avoid bankruptcy, but in reality it is a very scary threat.

The true definition of what a nationalization of a bank would be like is not known, hence more uncertainty in the overall economy and the markets. This vicious cycle of uncertainty and economic recessions or depressions is a difficult one to get stopped. One thing is for sure: the nationalization of the banking system as we know would be a major move and one that could threaten the system for many years to come.