Lloyd Blankfein, Goldman Sachs’ chief executive, called Vikram Pandit, his Citi counterpart, last month to discuss a merger, in a dramatic example of the secret manoeuvring that preceded the government bail-out of the financial sector, the Financial Times said.

The call, which was made at the tentative suggestion of the regulatory authorities or at least with their blessing, was made shortly after Goldman Sachs had won surprise approval to convert itself from a securities firm into a commercial bank on 21 September, according to several people familiar with the events.

They added that the conversation was brief as Mr Pandit rejected the proposal immediately.

A deal would have been structured as a Citi takeover of Goldman. In spite of the slide in Citi’s shares, its market value around the time of Mr Blankfein’s call was $108 billion, roughly double Goldman’s market capitalisation.

A merger between Citi and Goldman would have resulted in thousands of redundancies in their investment banking units and would have forced out several senior executives. Combining the two companies’ widely different cultures would also have been a challenge.

Goldman executives were not fully convinced of the merits of a deal with Citi but felt there was little downside in placing a call.

The possibility of serious merger talks between Citi and Goldman became a non-starter after this month’s decision by the US Treasury to inject $125 billion of capital in the two companies and seven rivals. The move was designed to allay investors’ fears of further failures among large US financial groups.

This month, Gary Crittenden, Citi’s chief financial officer, told analysts the group had had recent conversations with three banks. He said two – Washington Mutual, which was bought by JPMorgan, and Wachovia, which went to Wells Fargo – were known, but a third had not been “talked about publicly in any way”.