Updated from 3:02 p.m. EST

Bank of America

(BAC) - Get Report

and

Citigroup

(C) - Get Report

shares were battered Friday, as worries the two banking giants would have to be taken over by the federal government mounted.

Charlotte, N.C.-based BofA plunged as much as 36% and New York-based Citi dipped as much as 27%, before coming off their lows after the White House and both companies said nationalization was not something being considered.

White House press secretary Robert Gibbs said the Obama administration continues to "strongly believe" that a properly regulated, privately held banking system "is the correct way to go."

"That's been our belief for quite some time, and we continue to have that," Gibbs said, according to

The Associated Press

.

Shares of BofA, which have been battered to below the crucial $5 level earlier this year earlier in the day hit a multi-year-low of $3.14. In a statement, CEO Ken Lewis says the company continues to be profitable.

"We see no reason why a company that is profitable with strong levels of capital and liquidity and that continues to lend actively should be considered for nationalization," Lewis said. "Speculation about nationalization is based on a lack of understanding of our bank's financial position as well as a lack of appreciation for the adverse ramifications for our customers and the economy."

The stock more recently was trading down 3.6% $3.79.

Citi shares also hit a 52-week low of $1.61, before rallying then dipping again to $1.95, a decline of 22.3%.

Citi said in a statement that its capital base is "very strong." At the end of the fourth quarter Citi's Tier-1 capital ratio was 11.9%.

"We continue to focus and make progress on reducing the assets on our balance sheet, reducing expenses and streamlining our business for future profitable growth," the company said.

BofA completed its acquisition of

Merrill Lynch

on Jan. 1, not long before Merrill was forced to take billions in losses related to writedowns on securities backed by troubled mortgages. Lewis has been criticized for either not doing enough due diligence about the extent of losses within Merrill or overlooking those losses in order to seal a deal.

BofA, which also bought

Countrywide Financial

last summer, has received two capital injections from the U.S. Treasury's Troubled Asset Relief Program, or TARP, totaling $45 billion.

Citi also has been bailed out by the government twice in the last quarter of 2008. Citi has received $45 billion through TARP as well as the federal government backing some $300 billion in assets.

BofA

is also reeling over news that CEO Ken Lewis has been subpoenaed by New York State Attorney General Andrew Cuomo in an investigation over bonuses paid to Merrill Lynch employees at the end of last year -- before the deal was completed.

Cuomo's office is trying to determine if investors were misled about the depth of Merrill's losses in late 2008 and whether details of the bonuses to Merrill employees, contained in a nonpublic document, should have been disclosed to investors, according to the

Wall Street Journal

.