During testimony to Congress by Federal Reserve Chairman Ben Bernanke, questions arose about the mortgage bailout plan proposed by the Obama administration. Several members of Congress were very concerned that this rewarded troubled borrowers who overpaid or took too much risk, with no assistance to those home buyers who are current with their mortgages.

Dr. Bernanke defended the plan strongly, "Some borrowers presumably knew what they were getting into. But from a public policy point of view, the large amount of foreclosures are detrimental not just to the borrower and lender but to the broader system. In many of these situations, we have to trade off the moral hazard issue against the greater good."

There is a great deal of discussion about solving the current financial crisis by nationalizing the major money center banks, such as Citigroup and Bank of America. Every time this suggestion surfaces, Treasury Secretary Geithner issues a statement emphasizing that the Obama administration is committed to avoiding this outcome and keeping banks in private hands. We are now seeing discussions about an increase of the government's equity investment in Citigroup (NYSE: C).

Why is there such fear of bank nationalization? Some claim that this would mean the death of capitalism and the rise of socialism. However, this solution is being discussed by both Republicans and Democrats. In addition, no one expects the government takeover of the banks to be permanent like France, which eventually did take the banks private again. This would be only temporary in nature as during the Swedish banking crisis.