There's good news and bad news today in the merger melodrama surrounding Wachovia Corporation (WB: sentiment, chart, options). First, warring suitors Citigroup Inc. (C) and Wells Fargo & Co. (WFC) have extended their legal standstill through Friday morning. Both banks continue to work with the Federal Reserve Board to reach a mutually agreeable deal regarding a potential division of Wachovia's assets. However, The Wall Street Journal today cited insider sources who report that, after further inspection of WB's books, "Citigroup and Wells Fargo have been surprised by the concentration of assets they regard as low-quality." (Really?)

Reportedly, WFC and Citigroup were also troubled by the difficulty Bank of America (BAC) had Tuesday in selling $10 billion worth of stock. According to the Journal, both banks initially intended to sell stock as part of their respective Wachovia takeover plans -- but they're now realizing that may be easier said than done in today's market.

As its merger woes mount, WB is down nearly 6% out of the gate this morning. The shares are now trading below peak put open interest of 62,620 contracts at the October 5 strike.