Wachovia, Citigroup, Wells Fargo working with Fed on agreement

NEW YORK – Wachovia, Citigroup and Wells Fargo on Monday agreed to a standstill of all formal litigation activity – a sign that the banks and the Federal Reserve are working feverishly to reach an agreement over the fate of Wachovia.

The standstill agreement will end at noon on Wednesday, unless extended.

“We are pleased to participate with the Federal Reserve Board in a fair-minded, good faith process to achieve a prompt and successful outcome,” said Citigroup spokesman Michael Hanretta.

Federal Reserve officials have been in talks with Wells Fargo and Citigroup in the hope of getting the parties to come to an agreement, according to a person with knowledge of the talks. The person spoke on condition of anonymity because of the sensitive nature of the matter.

The Wall Street Journal reported Monday that the discussions could result in the two suitors carving up Wachovia Corp.’s network of 3,346 branches along geographic lines, citing people familiar with the situation.

Early last week, New York-based Citigroup Inc. agreed to buy Wachovia’s banking assets for $2.1 billion in a deal brokered by the Federal Deposit Insurance Corp. In a surprising twist of events, San Francisco bank Wells Fargo & Co. announced Friday that it agreed to acquire Wachovia in a deal worth $15.1 billion at the time, or $14.4 billion based on Wells Fargo’s closing price Monday of $33.64. Wells Fargo’s deal did not require any government support.

The battle between Citigroup and Wells Fargo for Charlotte, N.C.-based Wachovia moved to both state and federal court over the weekend.

Earlier Monday, Citigroup sued Wachovia, Wells Fargo and the directors of both companies, seeking more than $60 billion in damages for interfering with the bank’s planned takeover of Wachovia’s banking operations.

The standstill agreement reached late Monday immediately halts this and all other litigation activity.