A lot of the chatter at the end of the week was about whether Goldman Sachs South, formerly known as the U.S. Government, would step in to save Morgan Stanley.
There’s no question that Morgan Stanley is teetering on the edge of oblivion. Investors sold share in Morgan Stanley not quite like it was going out of style, but like it had gone out of style last year. Steve Schwarzman said that the firm’s borrowing costs were running at 1500 basis points above Libor. Pricing on the dredit default swaps went to infinity or thereabouts.
But would the government save Morgan Stanley? Or would it let it slide away into bankruptcy, like Lehman Brothers?
“My guess is that at some point over the weekend, Hank Paulson will announce that he’s using his new authorities under the TARP to effectively nationalize Morgan Stanley, following Gordon Brown’s lead in the UK. And Morgan Stanley will only be the first of many banks to suffer such a fate,” Felix Salmon writes on Portfolio’s Market Mover blog.
We’re betting he’s right.
Going out of business is for poor people. Wealthy bankers get bailed out of business failure.
Anyone want to stake out the sandwich shop across from the New York Federal Reserve to see if they’re working all weekend?