Morgan Stanley could buy Wachovia
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NEW YORK - Morgan Stanley chief executive John Mack received a call yesterday from Wachovia Corp. indicating interest in buying the investment bank, The New York Times reported, citing people briefed on the discussions. Other banks also expressed interest and Morgan Stanley is weighing a potential merger, the Times said.
"The smartest people at this firm are focused on solutions," said Mark Lake, a spokesman at Morgan Stanley. He declined to confirm or deny the Times report. Wachovia spokeswoman Christy Phillips-Brown said it was the bank's policy not to comment on "market rumors or merger speculation."
Morgan Stanley and Goldman Sachs Group, the biggest US securities firms, tumbled the most in at least a decade after a government rescue of American International Group failed to ease the credit crisis. The cost to protect against a default by the Wall Street firms rose to a record.
"They're fish in the barrel, the short sellers have them targeted," said William Smith, whose firm Smith Asset Management Inc. in New York manages $80 billion, including Goldman stock. "Morgan Stanley's probably going to wind up doing a deal, it's really a matter of survival."
HSBC Holdings PLC,
HSBC, Europe's largest bank, is not in talks with Morgan Stanley and isn't interested in pursuing a deal with the company, people with knowledge of the bank's plans said yesterday.
A spokesman for HSBC declined to comment, as did a spokeswoman for Wells Fargo, the largest US bank on the West Coast. A spokesman for JPMorgan, the second-biggest US bank, also declined to comment.
Goldman and Morgan Stanley have both done deals with Chinese companies: China Investment Corp., the state-controlled investment fund, bought a stake in Morgan Stanley in December, and Goldman invested in Industrial Commercial Bank of China Ltd. in 2006.
Morgan Stanley dropped $6.95, or 24.2 percent, to $21.75 in composite trading on the New York Stock Exchange, after sinking as low as $16.08. Goldman slumped $25.12, or 18.9 percent, to $107.89, the biggest one-day drop in its nine years as a public company.
The cost of credit-default swaps protecting against a default on the companies' bonds jumped by a record, with Morgan Stanley's rising to levels typical of companies in distress.
Sellers of credit-default swaps on Morgan Stanley demanded 19 percentage points upfront and 5 percentage points a year to protect the company's bonds for five years, according to broker Phoenix Partners Group. That means it would cost $1.9 million initially and $500,000 a year to protect $10 million in bonds, up from $680,000 a year with no upfront payment on Tuesday.
