High noon in the battle over Wachovia Bank has come and gone, but instead of heading back to the courtroom Citigroup and Wells Fargo are continuing their talks until Friday.

Signs of hope that the battle would be resolved by the end of their two-day standoff were dashed when the noon deadline came today but reports that negotiations continue renewed them. The Wall Street Journal reported that Citigroup was seeking partners to join its bid for the ailing North Carolina-based bank. Meanwhile, Bloomberg reported that Wells Fargo and Citigroup were in talks to split up the assets of Wachovia by geographic area, with Citigroup getting its Northeast branches and Wells getting its footprint in the South and Mid-Atlantic.

But the desperation factor is rising in all corners of this fight. And perhaps nowhere as much as it is in Vikram Pandit's corner office. It looks as if Citigroup will turn out to be a loser in this takeover, even if it does end up with some piece of Wachovia.

Everyone with a stake in this race is baffled about why Citigroup never signed a merger agreement with Wachovia in the first few days after it announced its intention to buy it for $2.2 billion and help from the federal government. Such an agreement might have kept Wells Fargo at bay.

And Pandit's response to this so far is weak. In a town hall meeting with employees earlier this week, he claimed that Wachovia chief executive Robert Steel verbally confirmed they had a deal two days before the Wells offer.

"We saved Wachovia from collapsing," Pandit told employees, according to the Financial Times. "We have to be compensated for that. That is like somebody buying a $2 ticket, winning $10…and somebody says, 'I am going to come and steal it away from you for two-and-a-half bucks.'"

Actually, that's not a great analogy. It's more like agreeing to give your used sofa to someone for free, but then turning around and taking fifty bucks from someone else who's willing to come pick it up from you sooner. Why wouldn't you take the better offer? It's not as if you signed a contract with the first guy.

Meanwhile, an editorial in the Wall Street Journal suggests that Pandit's effort to paint Citigroup as the Sunday night hero (à la Jamie Dimon) is way off base. Indeed, the Fed's motivation for orchestrating the Citigroup deal may have been to help boost confidence in Citigroup just as much as it was to save Wachovia. A beefed-up Citi, after all, would be less inclined to need a government bailout down the road.

"We suspect [the government's] real agenda has little to do with who gets Wachovia's branch network and mortgage portfolio and everything to do with convincing investors and other banks that Citigroup isn't itself in trouble," the editors write. "The feds appear to be acting on the belief that if Citi were left on the outside in this deal, the markets would take that as a sign that it is being culled from the federally protected herd."

This all leaves Pandit with very little ground to stand on. Meanwhile, the earthquake rattles on.