Takeover follies in the media sector reached new heights Thursday when

CBS

(CBS) - Get Report

Chief Executive Mel Karmazin told an audience of advertising executives that he'd like to buy

TST Recommends

NBC

from

General Electric

(GE) - Get Report

.

NBC doesn't fit with GE's strategy, but it would be perfect for CBS, Karmazin said, in remarks that were immediately picked up by

Reuters

and frantically flashed across

CNBC

.

There's only one problem. Even assuming GE wants to give up control of NBC, CBS can't buy it. Period. End of sentence, paragraph, story. The reason has nothing to do with Karmazin, GE Chairman Jack Welch, or God himself, and everything to do with the

Federal Communications Commission

.

FCC rules flat-out bar a single company from owning more than one broadcast network. The rationale is that networks are simply too powerful to allow one person or corporation to control more than one.

No matter that the rise of cable has diminished the power of the networks. The FCC grinds exceedingly fine, and the commission has shown no inclination to revisit this rule, whatever Karmazin or other network executives might think.

"I'd love to have two wives, but the state of Connecticut isn't going to allow that either," says one I-banking type who was highly amused by Karmazin's posturing. This person speculates that Karmazin threw out the possibility of a CBS/NBC combo as a bargaining chip in his efforts to get the FCC to raise the limits on the number of local television stations his network can own. (FCC rules now bar a single network from owning and operating local stations that have a total reach of more than 35% of all U.S. households. This regulation sticks in the craw of network execs, who are forced to pay hundreds of millions of dollars in compensation to the stations they don't own in return for the airtime on which they run their programs.)

"Those are going to be changing at the margin, those rules," this person predicts. "But putting together two of the three broadcast networks? The country's not ready for that." And even if the country is, the FCC sure isn't.

CBS says it stands by Karmazin's comments. NBC declines to comment.

At least Karmazin's loose lips didn't cost his shareholders too much money. The same can't be said for

Chancellor Media

(AMFM)

. The radio giant gave its stock a quick 20%

lift when it said last month that it was exploring strategic alternatives, possibly including putting itself up for sale. Since then, though, Chancellor stock has steadily slid. It closed Thursday down 1 1/8 at 44 1/4, below the level at which it traded before the announcement.

The problem: Analysts and radio executives alike are increasingly convinced that

Clear Channel Communications

(CCU) - Get Report

is the only possible buyer in the industry for Chancellor.

Infinity Media

(INF) - Get Report

, which has the financial wherewithal, faces insurmountable antitrust problems, and other radio companies are too small.

Meanwhile, the expected rush of

buyers from outside the industry apparently hasn't materialized.

Disney

(DIS) - Get Report

,

Tribune

(TRB)

,

Fox

(FOX) - Get Report

and other potential buyers are wary of the $20 billion-plus price tag (including debt) Chancellor apparently has put on itself. While radio ad billings are growing at a double-digit rate, the business has historically been a media stepchild and would-be buyers apparently want to see how it performs in a recession before paying the rich cash-flow multiple Chancellor demands.

Chancellor, which is controlled by the venture capital firm

Hicks Muse Tate & Furst

, apparently anticipated its announcement would force a bidding war. Instead, the reverse has happened. By so publicly looking for a way out of its investment, Chancellor and Hicks Muse execs have alienated investors who want to see Chancellor running the radio empire it has spent a small fortune building over the last few years. And with Chancellor's price heading south, Clear Channel has every incentive to wait instead of rushing to complete a deal. Chancellor didn't return a phone call.

All this has Chancellor's competitors -- especially those who've been forced to the sidelines over the last few years as the company has paid premium prices for its armada of radio stations -- watching Chancellor's sinking stock price with rising hearts.