8 Firms Want Twice-Failed First City Bank : Finance: Regulators seized it again last week. That means it can be acquired with less risk.

For at least a year, bankers have been waiting for ailing First City Bancorp to be closed by the U.S. government so they could buy it at less risk. Now the question is, to which victor belongs the spoils?

Regulators shut First City late Friday, the second bailout for the banking company.

The FDIC already has plowed almost $1 billion into the First City banking system since 1988, when it was bailed out the first time.

Regulators estimated that the new action will cost the federal government another $500 million--making it by one account the third-largest banking bailout in history.

“The original bailout was no good,” PaineWebber Inc.’s Lawrence Cohn said. “They never got enough money going in from the government, which didn’t realize how bad the asset quality was. Then the new management compounded the problems by being aggressive lenders outside their market.”

Now that the government has taken control, there are at least eight contenders for First City, with Chemical Banking Corp. topping most analysts’ lists.

First Interstate Bancorp, BankAmerica Corp., First Union Corp., Nationsbank Corp., Comerica Inc., Norwest Corp. and Banc One Corp. are also possible buyers for First City, with its $8.8 billion in assets.

First City spent much of 1992 trying to sell itself with limited government protection against loan losses. Bankers were not interested in the terms.

“In-market acquirers--Chemical, First Interstate, Banc One and Nationsbank--are in the best position to buy First City, because they can get the most cost savings,” Cohn said. “Banks will be standing in line to bid.”

Cohn would not rule out BankAmerica, “which has made no secret of the fact” that it would like to have First City’s commercial banking franchise.