The U.S. government has begun to take ownership interests in large banks such as Bank of America and Citigroup. This poses a few interesting problems. The first is "moral hazard." If you are a large company, and you know the government will bail you out of any bad decision you make, you become less careful and make more bad decisions.
This mis-prices risk. Normally, if some business action (i.e. lending, expanding, etc.) has an amount of risk attached to it, you will put an appropriate amount of money at stake. Poker is a good analogy: You do not know what the other players hold, but you can calculate your odds of winning, and the amount of money you stand to make, and risk (bet) an amount of money based on that information. Now, the government is saying that if you have the most money at the table, it is OK to bet it all on every hand, or certainly bet more than you normally would, because if you lose, the government will give you money.
The government's rationalization is that if they do not give you more money when you lose, you will have to leave the table, but you are so vital to poker that if you leave the table not only will the other players be forced to stop playing but the entire casino will come to a halt. People will realize that the poker chips are only made of plastic, and the cashiers will close their windows so you can't turn those pieces of plastic into real money. This will (naturally) lead to riots, fire, and brimstone, and poker will never be played again.
Clearly, the government has this all figured out.
The second interesting problem is that you, as a borrower, now owe money to the government instead of a private institution. So, if you do not pay your loan, whether it is in the form of a mortgage or credit card, you have now defaulted to big brother. In addition to normal collections procedures, the federal government also has the police power. In other words, you are no longer in default to a large corporation that can sue you; you are now in default to an entity with the power to arrest you.