When I was in college, Morgan Stanley was the place all of the soon-to-be Ibankers wanted to be. It was the blue chip, along with Goldman, of the NY Investment banking world. A company that once controlled markets is now at the market's mercy.
Here is Morgan Stanley's 52 week stock chart:
This is what happens when massive leverage goes in the wrong direction. It is like a freight train barreling out of control down the tracks. Marketwatch is reporting that creditors are already running from Morgan.
"Shares are now down 77% to a 10-year low. The bank is under pressure from counterparties many of whom are calling in their loans. Financing has dried up."
"The analogy is a snowball rolling down a mountain; the mass needed to stop that negative momentum increases as that snowball picks up speed and size,'' Egan-Jones's Sean Egan said in a phone interview today. ``Perception trumps reality. They need a massive injection to stop the slide and hopefully they don't commit the Bear Stearns or Lehman mistake.''
Morgan Stanley is supposed to be receiving $9 billion in capital on Tuesday from Japan's Mitsubishi UFJ Financial Group Inc. in exchange for 20% of the company. Many are now wondering if Morgan Stanley will make it to Tuesday and whether the $9 billion will be enough.
DollarSavingsDirect raised the rate on their online savings account from 3.75% APY to 4% APY, putting them at the top rate savings rate spot on the BestCashCow rate tables.
DollarSavingsDirect raised the rate on their online savings account from 3.75% APY to 4% APY, putting them into a tie for first as the top savings rate on the BestCashCow rate tables. We originally covered DollarSavingsDirect in late August when they first launched seperate from the bank's existing online division EmigrantDirect.com. It's becoming clear that DollarSavingsDirect is the brand that Emigrant wants to use to raise new deposit money.
The battle between Wells Fargo and Citi for Wachovia is over and Wells is the winner. Citi walked away citing concerns over Wachovia's loan portfolio. Wells gets to greatly expand its banking franchise but also inherits billions in bad loans.
The battle between Wells Fargo and Citi for Wachovia is over and Wells is the winner. Citi walked away citing concerns over Wachovia's loan portfolio. Wells gets to greatly expand its banking franchise but also inherits billions in bad loans.
For customers of Wachovia, the transition to Wells Fargo should be like any regular bank acquisition. Wachovia is offering some relatively high rates for a large bank including their 3.5% APY High Performance Money Market account and a 1 year CD that ranges anywhere from 4.10% APY to 4.30% APY depending on your state of residence. Both the money market account rate and the 1 year cd account rate are competitive.
As we saw with Bank of America's purchase of Countrywide, and Chase's purchase of WaMu, these competitive rates generally don't last long. Look for Wells to lower them in the next couple of months, if not sooner.
Was this a good deal for Wells? In the plus column Wells gains control of $448 billion in deposits in 21 states for the low price of $12 billion. On the minus column it inherits Wachovia's $498 billion loan portfolio, which includes about $122 billion of option adjustable-rate mortgages. These option adjustable-rate-mortgages have been defaulting at high levels and analysts estimate as many as $40 billion could go bad. The number could climb higher if the economy continues to deteriorate.
I'd have to assume Wells has had a chance to take a look at Wachovia's loan portfolio and feels comfortable with the risk they are taking. But if the economy continues to deteriorate they could be on the hook for more than they originally estimated. Overall though, I think Wells got a pretty good deal and now becomes the largest bank by branches in the United States.
