Morgan Stanley's $43 Billion September Run

So just how bad shape was Morgan Stanley in September? Really bad.

Morgan Stanley was forced to buy $23 billion of securities from its money market funds to meet investor redemptions. Of course, if those securities wind up declining in value, it could be forced to write-off billions more.

Here’s Reuters describing how bad the money market bank run got:

Morgan Stanley clients withdrew a net $46 billion from money-market accounts last month, forcing the embattled investment bank to buy $23 billion of securities from the funds to keep them afloat.

According to its quarterly results, filed with the Securities and Exchange Commission, anxious customers withdrew cash from money-market and liquidity funds as the breakdown of capital markets hammered banks and raised doubts about the future of Wall Street.

The September flight followed net outflows of $8 billion in the three months ended Aug. 31, Morgan Stanley said in the filing.

Morgan Stanley purchased securities to help fund investor redemptions as a wide range of money market instruments were impossible to trade. The bank said it bought highly rated, short-term commercial paper, municipal bonds, certificates of deposit and notes for its own books.

Such purchases could fuel losses for Morgan Stanley in future periods, if the recent past is any guide.

But wait! They’re highly rated! Surely that means they’re safe investments, right?

Anyone? Hello? Where did everyone go?

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