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With Wachovia already looking for a merger partner, the Federal Deposit Insurance Corp., in consultation with other regulators, required the bank to reach a sale to Citigroup on Monday morning.

The FDIC, for the first time, used legislative authority created in 1991 to help it deal with a “very large complex bank failure” on short notice. It requires approval from heavy hitters – two-thirds of FDIC board members, two-thirds of Federal Reserve board members as well as the Treasury secretary, who must consult with the president.

“When Wachovia opened Monday it would not have had a source of liquidity,” a source familiar with the situation said. “It really could not have opened under those circumstances. That’s why (the FDIC) put together the assistance package.”

The new details show the precarious situation Wachovia faced over the weekend as it rushed to find a suitor, even as Congress debated a possible bailout plan. Intense negotiations in New York included a decision by Wells Fargo to pass on a deal Sunday and frequent consultations with the Office of the Comptroller of the Currency, the bank’s primary regulator, and the FDIC, sources said. In the end, the FDIC, which insures customer deposits, forged the deal because it has “the pocketbook,” a source said.

In the resulting agreement, Citigroup agreed to buy Wachovia’s banking operations and most of its assets, with assistance from the FDIC. The agency will pick up losses above $42 billion on a $312 billion loan book in exchange for $12 billion in Citi securities.

Inside Wachovia, executives started noticing customers withdrawing money on Friday morning, following the failure of Washington Mutual on Thursday. “The so-called silent run on the bank – it’s real,” Carlos Evans, Wachovia’s wholesale banking executive, said in an interview. “When Congress failed to pass the ($700 billion bailout) proposal, when WaMu collapsed, you could see the money flowing. My computer screen was lighting up.”