After a day of dueling lawsuits yesterday (Monday), all parties agreed to halt litigation for two days as Citigroup Inc. (C) and Wells Fargo & Co. (WFC) continued to squabble over rights to purchase Wachovia Corp. (WB).

The three banks jointly pledged to “cooperate in good faith to agree among themselves to secure orders where necessary in all applicable cases in all jurisdictions,” according to a statement from Wachovia.

The agreement was reached after consultations with the U.S. Federal Reserve, Bloomberg News reported. The “litigation standstill” will be in effect until noon EDT tomorrow (Wednesday).

Earlier in the day, Citigroup had filed suit against Wells Fargo and Wachovia for $60 billion in damages for breaching the exclusive negotiation period Wachovia had agreed to as part of Citigroup’s original offer for Wachovia’s retail banking operations.

It was the culmination of a day of legal wrangling, as Wachovia won an injunction in North Carolina state court to halt Citigroup from delaying the merger agreement with Wells Fargo.

Meanwhile, in New York, Citigroup’s court order, granted over the weekend to extend the exclusive negotiation period, was overturned in state appeals court. Citigroup promised to appeal the motion.

Wells Fargo’s $15 billion, or $7 a share, offer for all of Wachovia operations easily trumps Citigroup’s $2.16 billion, or $1 per share, offer for just Wachovia’s deposits, loan portfolio, and retail banking branches. The Citigroup offer did not include Wachovia’s A.G. Edwards brokerage unit or Evergreen Investment Management Co. LLC mutual fund family.

But as part of its agreement with Citigroup, Wachovia agreed to exclusive negotiation rights through Monday, Oct. 6. Wells Fargo’s offer was accepted on Friday, Oct. 3.

"We’re all working together with regulators… to come to a solution and outcome that serves the public interest, and I think we will have one today," Sheila Bair, head of Federal Deposit Insurance Corp., said at a banking economics conference yesterday, Reuters reported.

While the FDIC is not formally involved in the negotiations, it is working with all parties involved to reach a mutually beneficial agreement.

Hedge fund investor, William Ackman, who holds approximately 170 million shares of Wachovia, feels the Charlotte-based bank is more valuable if its retail banking business is sold separately from its asset management and brokerage divisions.

“This company is worth more, in our view, if it’s broken into pieces,” Ackman said, Bloomberg News reported. “It’s worth more because of the tax benefits created from the separation. It makes sense for Citi to continue buying the banking subsidiary and it makes sense for somebody else to buy the holding company.”

Another proposal divides Wachovia’s retail branches along geographic lines with a portion going to each San Francisco-based Wells Fargo and New York-based Citigroup.