The federal bailout of the U.S. financial system will be too late to stop more pillars of the global banking business from toppling in the near term. That will necessitate more mega-mergers, direct government aid, or both.

Wachovia Corp. may be the next U.S. banking giant forced to sell itself, after its shares dived 47% last week.

Citigroup Inc. and Wells Fargo & Co. were said to be in a bidding war for $812-billion-asset Wachovia this afternoon, according to a New York Times report.

The Treasury and the Federal Reserve were involved in the negotiations, the Times said. Not surprisingly, the report said both Citi and Wells had "serious concerns" about taking on Wachovia’s loan portfolio, which is filled with rotten mortgages acquired in Charlotte, N.C.-based Wachovia’s 2006 purchase of California’s Golden West Financial Corp.

Meanwhile, the already-bad situation in Europe worsened over the weekend.

This afternoon, Belgium, the Netherlands and Luxembourg agreed to invest $16.3 billion in Fortis NV, the Dutch-Belgian financial services titan, to essentially nationalize the company, which has been sinking under the weight of bad loans -- including U.S. mortgage securities. See the Bloomberg News story here.

Also, Britain today was on the verge of nationalizing Bradford & Bingley, one of the country’s biggest mortgage lenders.

Bloomberg notes that Bradford & Bingley "is the third major British bank to run into trouble since credit markets seized up last year around the world. Its shares have fallen 93% this year. Northern Rock was nationalized in February, and HBOS PLC sold itself to Lloyds TSB Group on Sept. 18."

The British housing market, like the U.S. market, became a massive speculative bubble in recent years, pumped up by cheap money.

Photo credit: Joshua Roberts / Bloomberg News