Another day, and another American bank teethers on the brink. Washington Mutual (WaMu) may not have sold its assets in a distress sale yet, but the day may not be far off (See: figures at the end ). The possibility of a merger was first mentioned almost a week ago. In the meantime, investors in the stock spent harrowing moments over the last few days with the share price seesawing on contrary news. (See: Morgan Stanley, WaMu, seek mergers)

The stock hit a low of $1.50 a share on 16 September before bouncing back to nearly $5 by week's end on rumors that the big Seattle-based thrift might get acquired. Yesterday again marked a reversal of fortunes when the stock tumbled 21.7 per cent to close at $3.33.

Reason: fears that President George W Bush's $700-billion bailout of troubled mortgage assets might not be a good thing for banks if they are forced to recognise even larger losses on their mortgage holdings. (See: Bush administration announces $500-billion bailout package)

One major impediment to any acquisition is WaMu's loan portfolio. The bank is anticipating $19 billion in loan losses during this housing slump. Analysts say the losses could go as high as $28 billion. These are figures acquirers would be loath to take on in their balance sheets.

Another stumbling block that could hinder WaMu's ability to accept the government's help: it's possible the plan would require a limit on executive compensation for participating banks. WaMu is paying new chief executive Alan Fishman a compensation package of about $20 million a year.

A source familiar with WaMu said the federal bailout plan might help pave the way for a WaMu sale. Rather than helping the bank fix its own portfolio, the plan might put potential acquirers in a better position to buy the bank, he said.

Media reports on Monday pegged Citigroup, of New York, as the most interested buyer of WaMu and Toronto-Dominion Bank, of Toronto, was also rumoured to be interested. Citigroup declined to comment on the news and Toronto-Dominion could not be immediately reached for comment.

Wells Fargo and JPMorgan Chase have also been mentioned as potential suitors. JPMorgan, which had recently taken over beleaguered Bear Stearns' operations with the support of the US government, lacks a strong presence on the American West Coast, where WaMu is one of the top three players. JPMorgan CEO Jamie Dimon has said he's interested in beefing up the firm's retail banking operation and may pursue the acquisition route for the same. (See: JPMorgan Chase acquires Bear Stearns for $2 per share)

At the same time, Moody's rating agency downgraded WaMu's preferred stock to ''most speculative'', saying in a statement, ''WaMu's troubled asset portfolios are sizable in relation to its capital base.''

WaMu numbers that might scare some buyers
Washington Mutual Inc., the nation's largest thrift, is on the auction block, but it's now waiting to see how the government will treat its precarious situation. Prospective buyers have primarily shied away from the thrift because of its large mortgage-related assets. Here are some eye-opening numbers buyers have been seeing about the thrift courtesy of Standard and Poor's and WaMu:

 - $310 billion Total assets -- 10 times the size of IndyMac Bank, which failed in July
 - $181.5 billion Single-family home loans
 - $4.8 billion Losses in the first half of 2008, mostly due to bad home loans
 - $4.5 billion Provisions for losses added in third-quarter 2008
 - $19 billion Total mortgage losses foreseen for this economic cycle
 - 3.6% Percent of loans in arrears in the second quarter of 2008, up from 2.87% in the first quarter
 - $16.1 billion Subprime loans on WaMu's books
 - 13.4% Subprime loan default rate nationally
 - $52.9 billion Pay-Option Adjustable Rate Mortgages -- high-risk loans that allow the borrower to make low payments while the principle increases. Default rate nationally: 6.13%