Morgan Stanley Ponders Wachovia Merger
The Morgan Stanley investment bank is considering merging with the Wachovia commercial bank. The point is for the investment bank to have lots of capital on hand in the form of consumers' deposits. This would return the two back to their structure during the Great Depression, when the two split. Uh, oh, there's the D word, and we're not even officially allowed to say the R word yet! Let's just say Wall Street is getting completely rewritten this week, and while it's way too early to tell what this means to the average consumer, there will be repercussions. Blood, too, probably.
Morgan Stanley Considers Merger With Wachovia [NYT] (Photo: foundphotoslj)
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Just to clarify, Morgan was never a part of Wachovia. The "split" in the linked article refers to the splitting of J.P. Morgan & Co. into separate commercial (J.P. Morgan) and investment (Morgan Stanley) banks as a result of the Glass-Steagall act.
-Jason
I am waiting for brokers to jump out of skyscrapers! I have no sympathy for any of them. Live by the free market, die by the free market!
They never should have ousted Philip Purcell! He never focused on the mortgage markets. Blame John Mack for this clusterfail, he's the one who bought the high risk mortgage firms that led to their massive losses (almost 4 billion). Purcell never even had a losing quarter, just less profitable ones. Way to ruin everything my cousin built up for the company Mr. Mack...
These banks are combining to get capital, but also because they see that "can't fail" banks get bailed out. Our economy can handle one (maybe two) large banks failing. But we probably could not handle a "megabank" failure.
How is a company with $180 billion of option ARM's on their books (Wachovia) going to prop up Morgan Stanley. If you ask me, Morgan would be propping up Wachovia.
@ARP: this is why i'm perplexed at the fed's recent actions. sure, rolling smaller banks/investment firms/insurance cos. into mega-banks is easy, but let's be real here: this is EXACTLY like all the homeowners that were in the charge-refi cycle. that worked great until the day they were met with a "yeeeaaaah...you're tapped out. btw, your arm just reset & you'll need another $200/mo. starting next month."
I wondered when the word "Depression" would pop up...