The Federal Reserve is pushing Wells Fargo to consider options including taking Wachovia branches in the Southeast and California, the Wall Street Journal reported, citing people familiar with the talks. Wells Fargo would also take over Wachovia's asset management and retail brokerage businesses, the newspaper reported. Citigroup, meanwhile, would take Wachovia's branches in the Northeast and mid-Atlantic regions.

The plans being discussed now do not include any help from the US government, the Wall Street Journal reported.

Citigroup last week offered to significantly boost the price it was paying for Wachovia, the Wall Street Journal reported on Sunday, citing people familiar with the matter.

The proposal remains on the table, although the exact terms and structure of the sweetened deal are unclear, the newspaper said. A spokeswoman for Citigroup declined to comment on the report.

Citigroup, which has sustained about $60 billion of write-downs and losses during the credit crunch, is eager to buy Wachovia's banking assets, which include more than 3,000 bank branches. Banks are eager to boost their branch networks, which can be a stable source of funding as bond markets prove to be an increasingly expensive and unreliable place to secure financing.

Citigroup is seeking $60 billion in punitive and compensatory damages against Wells Fargo for interfering with the deal, according to a person familiar with the matter.