After a weekend of legal wrangling in New York over Wachovia's fate, Citigroup and Wells Fargo were negotiating Sunday night, under pressure from regulators, on a compromise that could essentially carve up the Charlotte bank among the two feuding buyers, the Wall Street Journal reported.

Under the leading plan, Citigroup would get Wachovia branches in the Northeast and mid-Atlantic regions and Wells Fargo would get branches in the Southeast and California, as well as Wachovia's asset management and brokerage businesses, the Journal reported. The Federal Reserve was pushing the discussions, the Journal reported, as it worried about the reaction of jittery investors today.

Wells Fargo and Wachovia declined comment on the report. Citi did not respond to a request for comment.

Meanwhile, in U.S. district court, Wachovia on Sunday asked a U.S. federal court judge to declare its merger with San Francisco-based Wells valid despite an earlier agreement with Citi. At a hearing Sunday in New York, U.S. District Court Judge John Koeltl said Wachovia "appears" to have been permitted to consider merger offers other than Citi's, but he did not make a decision. Another judge will take up the issue at a hearing scheduled for Tuesday.

Read the complete story at charlotteobserver.com