The queasy acceleration of bank rescues continued in the U.S. and in Europe last week and over the weekend. JPMorgan Chase acquired Washington Mutual; Citigroup absorbed Wachovia; the Dutch, the Belgian, and Luxembourg governments bailed out Fortis; and the U.K. treasury nationalized Bradford & Bingley, with Santander’s Abbey National taking over B&B’s branches.

While neither WaMu nor Wachovia failed in the eyes of the Federal Deposit Insurance Corp., there is little doubt that without government intervention the institutions would have been failures 13 and 14 in 2008. The JPMorgan Chase/WaMu deal looks like the better one for U.S. taxpayers: the bank will pay the FDIC $1.9 billion for WaMu’s banking business, and will mark down by $31 billion the broken loan portfolio that comes along with all those branches. The FDIC Deposit Insurance Fund was not tapped.

President George W. Bush, Treasury Secretary Henry Paulson, Federal Reserve Chairman Ben Bernanke, and FDIC Chairman Sheila Bair signed off the Wachovia end game. In a self-congratulatory statement, Paulson concurred with the Fed and the FDIC that a “failure of Wachovia would have posed a systemic risk.” Even better, said Paulson, “all Wachovia’s depositors will be protected and Wachovia’s senior and subordinated debt will be assumed by Citigroup.” The FDIC was pleased with itself, too, since “there is expected to be no cost to the Deposit Insurance Fund,” according to an FDIC statement. But wait. “The FDC has entered into a loss sharing arrangement on a pre-identified pool of loans” totaling $312 billion, the statement continues. Citi will absorb $42 billion of losses; the FDIC will handle the rest, in exchange for $12 billion in preferred Citi stock and warrants.

And a rather vague news release out of Richmond, VA, notes: “In support of this transition, the Federal Reserve Bank of Richmond stands ready to provide liquidity as needed.”

“My guess is that Citi is going to be looking to do something quickly with that $42 billion,” says Nancy Atkinson, senior analyst at Aite Group. “They could be eyeing some of the Treasury bailout billions, or there could be a fire sale.” Although it is one of the few institutions that had the ability to step in with a bid for Wachovia, Citi still faces “a troubled environment. Its global presence gives it some ability to weather the storm.” Wells Fargo and Santander—also considered potential bidders—remain “fairly strong,” Atkinson believes, and will continue to  “wait and see what comes along.” More bank mergers are ahead, she adds: “This is not necessarily going to be the story of the strong taking over the weak, but the weak taking over the weaker.”

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