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Morgan Stanley is looking for protection PDF Print E-mail
FXstreet.com (Barcelona) - John Mack, Morgan Stanley's Chief Executive, has begun to explore a merger with a commercial and bigger bank in order to look for an stable umbrella as protection of financial market crisis that has sent stocks to its lowest level since 1998.

Almost two weeks ago, Mack asserted "not thinking about selling the firm", but yesterday CNBC, and The Wall Street Journal Today, said that Morgan Stanley may be in talks to possibly be acquired by China's CITIC though Morgan is also considering a merger with Wachovia or another US bank.

Goldman Sachs is living a worst situation, some experts are saying that they are near to banruptcy, their Credit Default Swaps (similar to an insurance against bank default) were priced yesterday at 344 basis points which means that to insure against a 1 million dollars loss you have to pay 344,000USD, a very expensive premium (remember that Lehman Brothers CDS were above 1000 basis points and Morgan Stanley CDS are now at 500 basis points).

Morgan Stanley's share price dropped 24% yesterday to $21.75 and Glodman Sachs fell 14% to $114.50.

Markets react positively today after the Central Banks coordinate announcement, but the confidence is too hard of build and the risk aversion is present, according to Wachovia Securities, the crisis won't be finished after two days

Posted originally: 9/18/2008 3:35:00 PM

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