A flurry of lawsuits arose after Wachovia tried to back out of Citigroup's $2 billion offer to buy most of the company. Wachovia's motivation was simple: Four days after signing an agreement to discuss a deal with Citigroup, Wells Fargo offered to buy Wachovia intact for $15 billion, The Washington Post reported Tuesday.

Wachovia, Citigroup and Wells Fargo all said they supported the out of court negotiations, which would likely result in portions of Wachovia going to each suitor, the Post reported.

"We are pleased to participate with the Federal Reserve Board in a fair-minded, good-faith process to achieve a prompt and successful outcome," a Citigroup spokeswoman said.

The Fed is pushing for a quick settlement during a market environment fraught with financial brush fires.

The original Citigroup deal included a Federal Deposit Insurance Corp. agreement to accept all of Wachovia's losses beyond $42 billion.

The Wells Fargo deal was also costly to the government, as Wells Fargo would have parlayed Wachovia's losses into a $21 billion tax break, the Post reported.