The banking industry continues to teeter even as U.S. lawmakers prepare to vote on a bill to buy troubled financial assets.

The banking operations of Wachovia, the nation's fourth-largest bank, which has been hammered by its mortgage exposure in California and Florida, will be acquired by Citigroup.  The role of the Federal Deposit Insurance Corp. and the Treasury Department indicate that it was a sale overseen, if not forced, by regulators. Last week, regulators seized  Washington Mutual and sold the bulk of the business to J.P. Morgan Chase.

Under the deal, Citi will pay Wachovia $2.16 billion in stock and assume Wachovia senior and subordinated debt, totaling approximately $53 billion. As a result of the acquisition, Citi is cutting its quarterly dividend to 16 cents per share and is selling $10 billion in stock to raise capital.  The deal does not include the A.G. Edwards brokerage unit or the Evergreen investment operations.

The sale came the same day that fresh tremors shook Europe's financial system.

The British government, which nationalized Northern Rock a year ago, has seized control of lender Bradford & Bingley. The governments of Belgium, the Netherlands, and Luxembourg gave a $16 billion lifeline to Fortis. The German government has backed a loan to Hypo. Iceland, meanwhile, nationalized its third-largest bank.

Shares of Dexia tumbled in Paris trading after a report said that the French-Belgian bank may need to be rescued as well.

"The precarious global environment means the weakest links in Europe are now falling," Mamoun Tazi, an analyst with MF Global Securities Ltd. in London, told Bloomberg News.

The sale of Wachovia caps a similar shakeout in U.S. banking. The New York Times notes how a deal will further consolidate the banking industry into just a few banks.

"A sale to either Wells Fargo or Citigroup would further concentrate Americans' bank deposits in the hands of just three banks: Bank of America, J.P. Morgan Chase, and whichever bank acquires Wachovia would control more than 30 percent of the industry's deposits."