Filed under: Deals, JPMorgan Chase (JPM), Goldman Sachs Group (GS), Morgan Stanley (MS), Wachovia Corp (WB), Washington Mutual (WM)

This morning, I speculated that Morgan Stanley (NYSE: MS) might reunite with its former parent — JPMorgan Chase (NYSE: JPM). It looks like I was wrong about that. But the basic idea of finding a merger partner for Morgan Stanley is still alive. The New York Times reports that Wachovia (NYSE: WB) has been in speaks with Morgan Stanley about a possible combination.

Morgan Stanley’s stock fell another 24% this day and Washington Mutual (NYSE: WM), about which I posted this morning, hired Goldman Sachs (NYSE: GS) to find a buyer. So it could be that less than a decade after Congress repealed the Glass-Steagall act — which prohibited investment and commercial banks from combining — we’ll solve our current catastrophic financial problems by reconstituting the very thing that contributed so heavily to the Great Depression.

This looks to me like a desperate move that is only possible because commercial banks were required — due to their regulations — to hold more capital than investment banks. The investment banks were vulnerable because they bought such a big volume of complex securities that nobody now wants to purchase. And the decline in the value of these securities is wiping out the trim sliver of capital that they held.

Continue reading Will Wachovia purchase Morgan Stanley? And will anyone pick up WaMu?

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This entry was posted on Wednesday, September 17th, 2008 at 5:53 pm and is filed under Latest News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.