A big cover story in Monday's New York Times looks at how Simmons Bedding Company, a 133-year-old firm, was driven into bankruptcy by private equity firms. The story is alarming in a number of ways, not least for implication that private equity can be a powerfully destructive force in the "real," productive economy.

Could these same firms use similar techniques to push troubled banks over the edge? Now that the FDIC has voted to allow private equity firms to buy troubled banks, we could be looking at another tsunami of bank failures several years in the future.

As the FDIC fund dwindles to its lowest point since 1992, foreign banks may step up to save the day. Fewer U.S. banks have the reserves to buy failed banks, so the FDIC is looking at changing the rules to allow private investment groups to buy banks. It's also turning to foreign banks, especially those that already have a presence in the United States.

The FDIC bank rescue fund had a balance of $13 billion on March 31. Since that time three major bank failures -- BankUnited Financial Corp. in May and Colonial BancGroup and Guaranty Financial Group in August -- cost the fund $10.7 billion. Another 53 banks also failed in the meantime, with an estimated total cost for all bank failures since March 31 of $16 billion. Even at $13.2 billion, the fund was at its lowest point since 1992, when it was $178.4 million. Since March, banks have paid fees so the fund isn't insolvent, but it may be close.

Will the U.S. retreat from new rules that would make it harder for private-equity firms and hedge funds to buy failed banks? From Kohlberg Kravis & Roberts and Blackstone to Wilbur Ross and John Paulson, private investors have been pushing back against the changes, saying they're too onerous. If they become the law of the land, it'll become harder to find buyers for banks gone bust, they say.

Whether their complaints were effective will become clear next week, when the Federal Deposit Insurance Corp. plans to vote on the rules, it said today.

It looks like Wilbur Ross and John Paulson have some company.

Ross, who runs the private equity shop W.L. Ross & Co., and Paulson, the chief executive of hedge fund manager Paulson & Co., oppose new rules under discussion in Washington that would make it harder for firms like theirs to buy failed banks.

Now, as the window for public comment on the proposed changes closes, KKR and the Blackstone Group (NYSE: BX), two of the biggest private equity firms, say they too would probably be discouraged by the new rules from buying failed banks after they've been seized by the government.

Wilbur Ross isn't happy about a proposed overhaul of the rules that govern deals between the government and private investors for the assets of failed banks.

Ross, who runs W.L. Ross & Co., joined with a handful of other big private-equity investors to buy the remains of Florida's BankUnited after it was seized by regulators in May. But if the new rules pass, "I assure you that my firm will never again bid if the proposed policy statement is adopted in its present form," he reportedly wrote in a letter to the Federal Deposit Insurance Corp.

Deep-pocketed private equity firms hoping the Federal Deposit Insurance Corp. would make it easier for them to buy the assets of failed banks were disappointed last week. The agency signed off on preliminary guidelines that won't fundamentally change the rules -- meaning so-called club deals, like the one put together by four PE firms for BankUnited in May, probably won't be going away any time soon.

However, the complexity of those rules means banks with strong finances and aspirations to expand will remain in the best position to buy the assets and deposits of banks seized by regulators, according to Frederick Cannon, chief equity strategist at investment firm Keefe Bruyette & Woods. And the big bank to watch is US Bancorp (NYSE: USB), he wrote in a note to clients.

On Thursday, the Federal Deposit Insurance Corp. (FDIC) is expected to propose new guidelines for private-equity investors seeking to buy failed banks. Those guidelines are intended to ensure that these largely unregulated firms don't take too many risks with troubled banks or buy and flip them.

The new rules come as private-equity firms have grown increasingly active in the banking sector. FDIC Chairman Sheila Bair said she's comfortable with the private-equity deals the agency has struck for failed banks such as IndyMac and BankUnited, but that a more structured process needs to be put in place.

The FDIC found buyers for Atlanta's failed bankers' bank, Silverton, but none of Silverton's suitors wanted to pay enough for it. After analyzing the offers, the FDIC decided it would be less costly to shut the bank down than to accept the bids received.

Bidders included the Carlyle Group with a consortium of private equity investors, including Lightyear Capital, Harvest Partners, and Colony Capital. "We have to do what is least costly to our insurance fund and to shut it down for good was less costly than the bids we received," a spokesman for the FDIC told the Financial Times.

Not long ago, the private equity firm, Fortress Investment Group LLC (NYSE: FIG), appeared to be in deep trouble. But things are looking better now, as the stock price has gone from $1 to $4.65 this year.

In fact, Fortress is now pulling the trigger on some deals. Just this week, the firm teamed up with Crestview Partners LP and Lightyear Capital LLC to invest $450 million in First Southern Bancorp (Lightyear is operated by Donald Marron, who was the former chief of PaineWebber Group).

Senator Jack Reed, a Rhode Island Democrat and chairman of a Senate subcommittee charged with overseeing Wall Street, wants the Federal Deposit Insurance Corp. (FDIC) and other financial regulators to come up with rules for private equity firms that want to buy banks.

Reed's interest in the matter may give the FDIC an incentive to quickly fulfill a promise it made to provide "policy guidance" for such deals after seizing Florida-based BankUnited and selling it to a group of private equity funds last week in the biggest bank failure this year.

Regulators have seized BankUnited (NASDAQ: BKUNA), Florida's largest bank, and sold its deposits to a consortium of private equity funds, marking it the largest bank to fail so far this year.

BankUnited's failure will cost the Federal Deposit Insurance Corp. some $4.9 billion, the agency said in a statement. The bank boasted $12.8 billion in assets and $8.6 billion in deposits, according to the FDIC.