Morgan Stanley (MS)

[loridans]

MS to Pop on Monday

Morgan Stanley, Goldman May Gain Investment From U.S. Treasury

By Christine Harper

Oct. 11 (Bloomberg) -- Morgan Stanley and Goldman Sachs Group Inc., the biggest independent U.S. investment banks, may reap cash infusions as part of Treasury Secretary Henry Paulson's plan to buy stakes in financial institutions, investors said.

Paulson, in a statement yesterday, said the U.S. will purchase equity in a ``broad array'' of banks and other financial firms to restore market stability and ensure economic growth. The Treasury is working on a ``standardized program that is open to a broad array of financial institutions,'' he said.

Morgan Stanley Chief Executive Officer John Mack, 63, and Goldman Sachs CEO Lloyd Blankfein, 54, failed to regain investor confidence by converting their firms into bank holding companies last month and raising new capital from private investors. Morgan Stanley's stock dropped almost 60 percent this week, while Goldman's fell 29 percent.

``Based on the fact that they're allegedly commercial banks now and are moving that way, I think they're likely to get protection,'' said Benjamin Wallace, an analyst at Grimes & Co. at Westborough, Massachusetts, which manages about $700 million. ``Whatever solution they come up with for the banking industry as a whole will apply to them, because they're no longer special.''

Michele Davis, a spokeswoman for the Treasury, declined to comment.

Morgan Stanley and Goldman were among the most profitable firms in Wall Street history and paid out $36.7 billion in compensation and benefits to employees for 2007. Both investment banks stayed profitable through the first three quarters of this year.

Lehman's bankruptcy on Sept. 15 ignited investor fears about Goldman and Morgan Stanley. To try to win back confidence, the firms obtained Federal Reserve approval to become bank holding companies.

Buffett, Mitsubishi

Goldman raised $10 billion on Sept. 24 from Warren Buffett's Berkshire Hathaway Inc. and a public share sale. Morgan Stanley struck an agreement to get $9 billion from Japan's Mitsubishi UFJ Financial Group Inc. The accord is scheduled for completion on Oct. 14.

Moody's Investors Service added to the concern about both investment banks on Oct. 10, when it placed Morgan Stanley's A1 long-term rating on review for a possible downgrade and lowered its outlook for Goldman Sachs's Aa3 long-term rating to negative.

Morgan Stanley's $4.5 billion of 6.625 percent senior bonds that mature in April 2018 fell to 61 cents on the dollar yesterday from 71 cents a week earlier.

Paulson, supported by Federal Reserve Chairman Ben S. Bernanke, won Congressional approval last month to spend as much as $700 billion to buy assets from banks and take equity stakes as part of the so-called Troubled Asset Relief Program, or TARP.

`Follow Through'

The move followed the bankruptcy of Lehman Brothers Holdings Inc. in mid-September after the government refused to provide money to support a takeover. The Lehman failure roiled debt markets and led to a loss of confidence in Morgan Stanley and Goldman.

``The government can go a long way by buying a stake in Morgan Stanley,'' said David Killian, a portfolio manager at Valley Forge Advisors LLC, which oversees $650 million, including Morgan Stanley shares and bonds. ``Paulson has to follow through on his promises; he and Bernanke went to Congress and said `we need this TARP facility to protect against ongoing systemic risk' and here we go, put your money where your mouth is.''

The U.S. government will support Morgan Stanley and Goldman after Lehman's bankruptcy caused losses in money market funds and led investors to avoid commercial paper, which companies rely on for short-term funding, according to Grimes &Co.'s Wallace.

Lesson Learned

``The government learned its lesson with Lehman,'' said Wallace. ``You need them to potentially come in and invest in these companies.''

Egan-Jones Ratings Co. said Morgan Stanley probably needs to raise $60 billion in new equity to reassure customers and investors. The investment bank has about $900 billion of assets and an equity market value of $10 billion. Mark Lake, a Morgan Stanley spokesman, declined to comment.

``The analogy is a snowball rolling down a mountain; the mass needed to stop that negative momentum increases as that snowball picks up speed and size,'' Egan-Jones's Sean Egan said in a phone interview yesterday. ``Perception trumps reality. They need a massive injection to stop the slide.''

The government can't allow financial companies to continue collapsing, Paul Krugman, an economics professor at Princeton University, said in an Oct. 9 interview.

`Big Mistake'

``It's really hard to put humpty-dumpty back together again after those things fail,'' Krugman said. ``The failure to rescue Lehman it turns out was a really big mistake.''

Morgan Stanley is selling more than 20 percent of itself to Japan's Mitsubishi UFJ for $9 billion -- an amount that nearly equals Morgan Stanley's total market value. The slide in Morgan Stanley shares has led investors to question whether the deal, scheduled to be closed on Oct. 14, will go through as planned.

Mitsubishi UFJ agreed to pay $6 billion for preferred stock and $3 billion for common stock at a value of $25.25 apiece, or 62 percent more than yesterday's closing price. Morgan Stanley and Mitsubishi UFJ have moved to quash speculation that the deal would collapse.

``I would be angry if I were a Mitsubishi shareholder and I got the same amount of Morgan Stanley when the stock has been cut in value,'' said Kenneth Crawford, a senior portfolio manager at Argent Capital Management in St. Louis, Missouri.

Crawford said he sold his Morgan Stanley stock last month after Lehman went bankrupt and American International Group Inc. was forced to rely on government support to fund itself.

`Incredible Scenarios'

``After Lehman was allowed to go bust and then AIG couldn't come up with the liquidity they needed, all of a sudden it seemed more likely that incredible scenarios could be more credible,'' he said.

Mitsubishi UFJ would be the second overseas investor to take a significant stake in Morgan Stanley. In December, China Investment Corp. paid $5.58 billion for equity units in Morgan Stanley that pay 9 percent a year and convert to common stock in 2010, granting CIC about 10 percent of the U.S. company.

For Morgan Stanley and Goldman, becoming bank holding companies regulated by the Federal Reserve may ``limit profit opportunities,'' while at the same time lower risks, Moody's Investors Service said when it cut the ratings outlook for both firms on Oct. 10.

Moody's in August cut Morgan Stanley's long-term credit rating from Aa3. At A1, the firm now has the fifth-highest investment grade rating.

The Morgan Stanley credit review affects about $200 billion of debt, Moody's said. The ratings company affirmed its Prime-1 grade for Morgan Stanley's short-term debt. The outlook for Goldman affects $175 billion of debt, and the company's short-term ratings were also affirmed at Prime-1.

``The government is not going to allow this to go the way of Lehman because the repercussions of Lehman have been vast, especially the resulting losses in money-market funds,'' Valley Forge's Killian said.

To contact the reporter on this story: Christine Harper in New York at [e-mail].

[Vulcanized Crawler]

paulson can now buy in to MS if Mitsubishi bails .....
how low will it go. last time...few weeks back.... i bot ms at 12 and change and it then ran to 33 after short selling was halted. can i repeat the magic?? hope so. monday, whats the price???

[MWM]

MS falling hard? Gov't going to Nationalize?

[Vulcanized Crawler]

no that shorts are back what is bottom for ms?
a buck???

[PENNY_STOCKS]

$26.50 now, climbing back up after this mornings pullback.

[PENNY_STOCKS]

BB&T chief exec slams bailout planBaltimore Business Journal

A significant and immediate tax credit for financial institutions to purchase homes would be a more effective solution for the financial crisis than the proposed $700 billion federal bailout, said BB&T CEO John Allison.

The federal government should also buy homes, and not securities backed by mortgages, he wrote in a Sept. 23 letter to the U.S. Congress.

“This is a housing value crisis,” Allison wrote. “It does not make economic sense to purchase credit card loans, automobile loans, etc. The government should directly purchase housing assets, not real estate bonds.”

In his letter, Allison questions how the government will pay the proper price for distressed real estate assets. Overpaying will harm taxpayers, while underpaying will hurt real estate markets. He also believes allowing homeowners to use the bankruptcy to restructure their loans will “force losses on banks.”

He adds the primary beneficiaries of the proposed rescue are Goldman Sachs Group Inc. (NYSE:GS) and Morgan Stanley (NYSE:MS). The U.S. Treasury, he says, is “totally dominated by Wall Street investment bankers,” and “cannot be relied on to objectively assess all the implications of government policy on all financial intermediaries.”

Allison also said it is “inappropriate that the debate is largely being shaped by the financial institutions who made very poor decisions.”

He pins the responsibility for the crisis on Freddie Mac and Fannie Mae.

Winston-Salem, N.C.-based BB&T is the fifth-largest commercial lender in Greater Baltimore and ranks No. 6 for deposits, according to Baltimore Business Journal research.

BB&T is a $136 billion banking company with 1,500 branches. Although the company (NYSE:BBT) has been hurt by the slowing real estate markets, it continues to turn a profit. It posted second-quarter net income of $428 million, or 78 cents per diluted share. It made $458 million, or 83 cents per share, in the second quarter of 2007.

Allison is scheduled to retire at the end of the year.

[PENNY_STOCKS]

BRIEF-Morgan Stanley CEO says Mitsubishi deal advancing-CNBC

NEW YORK (Thomson Financial) - Sept 26 (Reuters) - Morgan Stanley:
* CEO tells employees Mitsubishi deal moving ahead-CNBC
* Deal with Mitsubishi 'days away' from being completed-CNBC
* Will raise $8.5 billion to $9.5 billion in additonal capital-CNBC

[PENNY_STOCKS]

Picked up a few shares today on hopes of congress finalizing the bailout in the next few days.

[Staranalyst]

Long or short in MS?

[MrSparex]

Whatta chart!