U.S. regulators stand ready with more bank capital

I am still trying to understand what this means in economic terms. Is the government trying to nationalize the banks? If so, is it good? If not, how different it is?

On more reading, this is what I understood: The government is planning to assess the big banks using something called "stress-test". It is a computer-run simulation program using the banks financial portfolio to estimate what would happen if the economic situation gets worse, for example, with unemployment surging to 10 to 12 percent, home price dropping 20 percent further etc. If the banks show that they do not have sufficient capital and liquidity that they need to provide the credit necessary to restore economic growth, then the U.S. government stands behind them to support them at this financial stress time. In simple term, it means that the banks will get more taxpayers money. In return, the government gets the power to control the banks. This means that the government could take control of the public shares, pick and install new management and boards of directors, change corporate policies and set new corporate strategy.

Well, now I understand what "nationalization" means. But to me it sounds good and not bad. So I went on finding more about nationalization of banks and how it is conceived.

Historically speaking, the banks are under government control for two reasons: either because an administration or regime maintains near-complete control of all business, as in China, Russia, North Africa and South America, or because there is a severe economic crisis that impels the government action. A capitalistic society believes in separating the powers of government and the financial institutions. The government should not get into the way the money is handled in the society. The banks are treated like any other corporate business. If the banks are weak, they must die like any other business. Government's attempt of "nationalization" is only a temporary measure - it won't solve the issue but just defer it to the future. On the other hand, a socialist society believes more in the government controlling the money - it believes that the banks should create an environment to promote the flow of wealth from rich to poor. The government can positively impact the economic crisis situation by helping the bank and thus indirectly helping the people.

Well, now I can sort of understand why the stock market is jittery at the talks of "nationalization" of banks. It is an alien concept to America. Capitalism is the key to America's success. Nobody wants to change that. Therefore, the government is talking not about "nationalizing the banks" but only "temporarily" backing the banks if required. In short term, I don't see how different they are but in longer term, maybe it is just the government's way of saying to the banks that we will support you till the crisis is over; we will back out once we know that you can hold yourself.