The German government originally gave Hypo $135.5 billion in guarantees, which seemed to do little good for the drowning bank, after which the proposed take-over--initially suggested in January--came under more serious consideration. The idea was that Berlin would take an 8.7% stake, buying the lender's outstanding shares, while Soffin--the German government's financial market stabilization fund--expressed a plan to offer for 91.3% of Hypo's shares, which would have translated at the time to a $390-million transaction.

The storm clouds gathered after Hypo's first quarter numbers came in reporting a pre-tax loss of $540.5 million for Q1. As reported by GlobeSt.com in early May, Hypo Real Estate's total portfolio declined from $558.7 billion of assets at year-end 2008 to $547.3 billion at the end of Q1. This set the stage for the government-led takeover.

Even now, however, reports say that the bank does not believe Berlin's capital infusion will be enough to cover its write-downs from problem loans, as it anticipates future negative gains on 2009's horizon, say reports. Germany has not nationalized a bank since the 1930s.