NYT reports that the North Carolina banking giant is in early merger talks with Citigroup. For some weeks there's been talk about Wachovia teaming up with another financial services company. Despite having a strong branch network and management team, Wachovia has taken a huge hit with the option adjustable mortgages it acquired in the purchase of California's Golden West Financial. There's no telling whether the Citi discussions will lead to a deal, according to the Times. A week and a half ago, Wachovia began deal talks with Morgan Stanley, but nothing has come of that. At the very least, it's another cautionary tale about expansion: Both Wachovia and Washington Mutual were badly hurt by huge acquisitions involving California-based institutions.