LOS ANGELES – As the Treasury Department struggles to justify a $700 billion bailout of the nation’s financial system, troubled Washington Mutual reportedly is under the gun to avoid the same fate as other institutions and steer clear of government intervention.

The Seattle-based thrift faces the prospect of having its operations splintered among several buyers, according to a story in Tuesday’s Financial Times, as the company’s stock continues to fade. Washington Mutual shares were off another 3.9 percent to $3.20 in recent action.

Washington Mutual, the nation’s largest thrift with $310 billion in assets, reportedly is under the gun from the Office of Thrift Supervision to get a deal pushed through, but analysts say it all may have to wait until Treasury Secretary Henry Paulson brokers a deal with Congress to get the high-stakes bailout plan pushed through.

Washington Mutual wouldn’t comment. OTS officials also said they couldn’t comment.

“We’re aware of the situation and we’re monitoring it closely,” said OTS spokesman William Ruberry.

Such a deal to buy up “toxic” mortgage assets on banks’ balance sheets could affect the marketability of Washington Mutual – particularly if its mortgage business benefits from a government bailout.

A single buyer might be willing to take on the whole company if the mortgage business is shielded by the government. Otherwise, a breakup to segregate its attractive retail banking and deposit base is possible.

“The problem in my mind all along has been what are you going to do with the loan exposure,” said Howard Shapiro, analyst with Fox-Pitt Kelton.

The Times reported that five banks have come forward and are examining the prospect of buyer some or all of Washington Mutual. They include J.P. Morgan Chase & Co., Wells Fargo & Co., Citigroup Inc., HSBC and Spain’s Banco Santander.

All five firms declined to comment on the report.

Washington Mutual’s ratings were cut by Moody’s Investors Service on Monday, ratcheting up the pressure on the firm.

But Shapiro said there may yet be a little time before the company has to sell itself. Washington Mutual filed a memorandum of understanding with OTS, indicating that it had enough capital to keep operating.

“We don’t see any sign of true panic,” Shapiro said.

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