That faint sound you hear off in the distance? It's Citigroup chief executive Vikram Pandit chuckling as he reads Wachovia's third-quarter earnings announcement.

The numbers might make Pandit feel slightly vindicated after Citigroup lost out to Wells Fargo in a bid to buy the troubled North Carolina bank earlier this month. Wells' stock deal, originally valued at $15.4 billion that's now worth about $14 billion, trumped Citigroup's $2.1 billion offer, which included government assistance.

This morning, in what will likely be the last earnings announcement from Wachovia, the bank reported a staggering $23.9 billion loss. Excluding certain one-time charges, it lost $2.23 per share, which was far greater than analysts' expectations for a two-cent-per-share loss.

Still, Wells Fargo said it expected these numbers. "Wachovia's third-quarter results were very much in line with our expectations," said Wells Fargo chief executive John Stumpf in a statement. "We're more encouraged than ever by what we've seen in their franchise, and we're pleased that Wachovia's team continues to focus on serving customers."

Not surprisingly, Wachovia's customers fled during the period of turmoil in the third quarter. While average deposits were up 4 percent during the period, actual deposits at the end of it were down 2 percent over last year, which suggests a bit of a run on the bank during the final weeks of the quarter.

Wachovia also continues to be battered by bad loans from its Golden West mortgage division. Wachovia purchased Golden West for $25 billion two years ago. This morning's earnings release includes the rather shocking fact that Wachovia expects losses from certain payment option mortgages at Golden West to reach $26.1 billion by the end of next year—more than the price it paid for the entire business.

All this will soon be Wells Fargo's problem. The deal remains on track to close during the fourth quarter.

Meanwhile, Wells Fargo also gets a flood of legal costs along with Wachovia and its toxic mortgage portfolio. Citigroup is seeking $60 billion in damages from Wachovia for walking away from its exclusivity agreement. Wells Fargo has filed a lawsuit trying to dismiss Citigroup's claims. Wachovia is also being sued by shareholders.  

Wells Fargo chairman Richard Kovacevich remains hopeful, even as his bank is about to be loaded down by Wachovia's mortgage book. In a speech in San Francisco last night, he said he believes the recession will end early next year. "There may be doubts how long (the recovery) will take, but it will get done and sooner than most people think," Kovacevich said. "Governments will do whatever it takes to stabilize the financial system."

He clearly has reason to hope so.