The nationalization of the banking system continues with the FDIC assisted sale of Wachovia (WB) to Citigroup (C).  The purchase price:  a whopping $1.

Wachovia closed at $10 per share on Friday, so the news is a big shock to those who believed that WB would be one of the winners of the credit shakeout. 

This despite its disastrous purchase of Golden West Financial in 2006 and the billions of dollars in pick-a-payment adjustable rate mortgages.

At the time of that fateful deal I remember wondering if this would be a deal that killed the goose.  I guess I was right.

There is no running from your mistakes, and now what was once a wonderful success story will be forever tainted as a failure.  For those impacted by this failing, I feel genuine sorrow.  It is truly a sad day when these institutions fail. (See also: "Don’t Play Risk With Your Retirement" and "How to Play the Wall Street Bailout.")

Ah, but this is not a failure according to the FDIC, the institution that is scared of the next domino to fall.  Not a failure?  Does that mean it is a success?

I suppose you could look at it that way, but this is no success story.  Instead, this is the government pushing a deal in furtherance of deciding who will be the winners and who will be the losers in this sad drama.

They have no choice.  There is a very real risk that a massive run on the bank overwhelms the entire FDIC system, a system that some would say could never fail.  Look at where we are now. (Don’t let this market get you down. Find out how to profit from the meltdown by clicking here.)

As for Citigroup, the deal looks to be positive for them.  Clearly, they are on the government list of banks that will survive, as prior to this deal there were serious questions regarding its own solvency.  Instead, they become the white knight swooping in to buy WB.

What do they get for their effort?  The jewel of course is the 4,300 retail branches and some $600 billion in deposits.  In addition, they do take on the liabilities of WB, but that bold step is protected by the FDIC and the government’s bailout program of buying up bad assets on bank balance sheets.

Oops.  Congress decided to throw a monkey wrench into that little bit of insurance by not passing the bailout legislation.  What will that mean for Citigroup?

Already the cost of this deal is pretty high.  Citigroup assumes $53 billion of WB debt and they will absorb up to $42 billion of loan losses with the FDIC protecting the rest.  To get the deal done, C will slash its quarterly dividend in half and issue $12 billion in preferred stock and warrants to the FDIC.

Management of C is thrilled and rightly so.  Not only do they make a wonderful acquisition at a fire sale price, they are essentially removed from the endangered species list.

The FDIC has made sure of that, but what about common equity holders of C?  Are they winners in this deal?

I don’t think so.  As the credit crisis continues it has become increasingly clear that equity owners, even for those entities that survive, will be the big losers in this deal.  Despite Citigroup management stating that the deal will be accretive to earnings in a short period of time, I would be skeptical.

The market had reacted favorably to the deal sending shares of C above $21 per share.  That move was short lived as investors sold shares aggressively on news that the government bailout legislation failed to pass a House vote.

With Citigroup down some 4% today, it is clear there is still much risk in the deal despite the assurance from the FDIC. 

I would caution investors to steer clear unless for a willingness to assume great risk.

This article was written by Jamie Dlugosch, contributor to InvestorPlace.com. For more actionable insight like this, go to: www.InvestorPlace.com.