The price has now fallen to 55p; if it stays like that, I presume no private investor will take up the chance to buy more at 65.5p, so the government will indeed get the majority stake. The Lloyds TSB and HBOS merger will go ahead (with the HBOS part valued at less than before), and the government will end up with about 40% of the merged firm - so it's 'part-nationalisation' for that, but the government will more or less control it.
I think it may be a good thing for the stability of the system, though; and the government is getting real shares, as well as some preference ones, so if the banks recover, taxpayers will get some money back from this. And there's a decent amount of control for the government - from the announcement:
As part of its investment, the Government has agreed with the banks supported by the recapitalisation scheme a range of commitments covering:
* maintaining, over the next three years, the availability and active marketing of competitively-priced lending to homeowners and to small businesses at 2007 levels;
* support for schemes to help people struggling with mortgage payments to stay in their homes, and to support the expansion of financial capability initiatives;
* remuneration of senior executives - both for 2008 (when the Government expects no cash bonuses to be paid to board members) and for remuneration policy going forward (where incentive schemes will be reviewed and linked to long-term value creation, taking account of risk; and restricting the potential for 'rewards for failure');
* the right for the Government to agree with boards the appointment of new independent non-executive directors; and
* dividend policy.
http://news.bbc.co.uk/1/hi/business/7666625.stm