Wells Fargo won a battle for Wachovia as Citigroup broke off negotiations on Thursday.

Citigroup said it will seek $60 billion in damages from Wells, which made a bid for Wachovia after Citigroup had agreed to buy it in a deal facilitated by federal regulators. But Citigroup will not attempt to block the Wells-Wachovia deal in court. Here’s more from the Associated Press:

Wells Fargo said late Thursday it had ended talks with Citigroup and was moving ahead to acquire all of Wachovia’s banking and other operations. It said the deal would not require aid from the Federal Deposit Insurance Corp. or any other government agency.

“We’re pleased Citigroup has abandoned its efforts to interfere with Wachovia’s planned merger with Wells Fargo,” said Wachovia spokeswoman Christy Phillips-Brown in an e-mail to The Associated Press. “We look forward to completing our merger with Wells Fargo, which we have always believed is in the best interest of shareholders, employees, creditors and retirees as well as the American taxpayers, and it imposes no risk to the FDIC fund.”

The bid from San Francisco-based Wells is now an $11.7 billion all-stock offer, down from $15.1 billion because Wells stock has declined. (Bloomberg News photo taken in San Francisco.) Read the AP story HERE.

And in other mortgage news…

• U.S. to invest directly in banks, pundits say
• O.C. mortgage rates jump on Fed move
• Subprime’s prime territory
• O.C. bill-paying index at lowest in 19+ years
• O.C. mortgage rates steady as Dow tanks
• O.C. listings of distressed homes 6% off peak
• Three super banks to dominate O.C. lending

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