By allowing financial firms to convert preferred shares the government owns to common shares, the government would take a voting position at companies it has sought to help, The New York Times reported Tuesday.
Economist Peter Morici at the University of Maryland said the Obama administration "is on track to nationalize the nation's largest banks, unless it alters policy and creates a Bad Bank to absorb commercial banks' mortgage-backed securities."
In addition, American International Group, a company deep in bailout commitments, is foundering and may require more help, the Times said.
Chrysler LLC and General Motors Corp., still in a sales slump, have increased their requests for emergency loans from $17 billion to $39 billion.
On Monday, the Treasury Department named Steven Rattner, co-founder of the Quadrangle Group, as the government's liaison to the automotive industry.
Eventually, the government maybe cornered into nationalizing some large corporations, an official said.
"Given our involvement at this particular stage, there is ... a possibility over time, that we will end up with some ownership of these institutions," a senior government official told the Times.