When Sandy Weill, the former CEO of Citigroup, was relentlessly acquiring other businesses to form the Citi empire, he would never have dreamed that today, Citi would be facing a difficult choice of closing down or being nationalized.

In actuality, Citi is already nationalized. With the U.S. government’s $45 billion bailout and Citigroup’s current market value of only over $10 billion, Citi is technically bankrupt. Professor Robert of the China Economics and Management Academy at the Central University of Finance and Economics (CUFE) pointed out that since the U.S. government previously agreed to absorb Citibank’s bad assets, which amounted to hundreds of billions of dollars, Citigroup is already government-owned. Now, the U.S. government wants rights, and the first step is a debt-for-equity swap and becoming Citi’s controlling stockholder. This means that the U.S. government will directly become Citi’s stockholder and participate in Citi’s management. Now, the only thing that Citi can do after having lost its supporters is to bargain and request that the government decrease the number of stocks it holds. However, Citi, the fallen aristocrat, has already lost its right to speak.

In addition to Citi, other financial institutions are facing nationalization. The $800 billion rescue funds did not solve the problem and financial institutions are continuing to face problems with debt. According to the second version of the financial rescue plan, the U.S. government will perform a comprehensive “stress test” on major banks, whose assets exceed $100 billion, in order to determine their financial health situation. If a bank does not pass the test, the government will give the bank “extra support,” but with strings attached. The government has already fully intervened through actions to save financial institutions and the result is only a page away from total nationalization.

The response of the market can be seen in the plunge of U.S. financial institution stock prices, showing a loss of confidence. This stems from various reasons:

First, although the U.K., the pioneer of nationalization, achieved excellent results in the beginning of this rescue period, Prime Minister Brown of the U.K. is now witnessing failure. Europe has already put government ownership at the bottom of its stock of rescue strategies and will not use it except as a last resort. The U.K. is trying its best to avoid nationalizing of the Bank of Scotland. Secondly, nationalization of banks does not solve the banks’ problem of excessively high debt-to-equity ratio after the burst of asset bubbles. The government cannot save banks, but not save the investment companies. The problem is that if large-scale funds collapse, banks will also suffer the same fate. Third, Americans have a deep-rooted sense of distrust for the government’s market efficiency. Although they hate the Wall Street fat cats, they still are not willing to see the economy become nationalized. The free market is the spirit of the American people. Now, with the spirit lost, it’s merely a name.

Of course, the U.S. government hopes to make financial institutions get through this difficult stage, but after this first step, who knows how the economic model will change. Today, Citi is nationalized. Tomorrow, it will be Bank of America and the day after that, the investment companies. Based on this logic, the government will own the entire financial market.

Another fatal suspicion is that the U.S. government's funds used to save Citi have already been squandered. If we do not want to make taxpayers pay too much, the U.S. government must allow nationalized financial institutions to make a profit. What will they rely on? Will they rely on government management or special preferential policies for financial institutions? This line of thinking makes Wall Street tremble with fear.

Therefore, some heavyweight economists jointly wrote an article, pointing out that the U.S.’ escape from the Great Depression was not the Roosevelt administration’s doing; since economic cycles are unavoidable, we should just let the depression become an economic “disinfectant.” The government does not need to get too involved; it just needs to do its own part well – public service and supervision.

The U.S. struggle for bailouts is actually a struggle between two factions. Those who support the bailout believe that the government should be able to iron out the economic cycle and that measures to counteract the cycle can help the overall market get through this crisis. Trust the government, they say. However, people from a different school of thought hate this. They believe that without economic cycles, there would not be a free economy. From the founding of the country until today, the U.S. has been tested countless times by economic cycles. As long as people have faith in the market’s strength, they can tough it out. Although a price must be paid, it is necessary. It is not easy for any single economic structure to achieve a transformation.

The U.S. government is standing at a crossroads. Should it temporarily squash the spirit of the free market in order to let the economy get through the crisis, or should it protect the free market and let the economy suffer the pain? The scariest thought is that even after squashing the free market spirit, it will still suffer pain. Relatively speaking, nationalization is really the riskiest choice.