September 23, 2008
Even as negotiations continue in Washington over a proposed $700
billion bailout of the credit markets, one troubled investment bank
has found some relief in Asia. Morgan Stanley says Japanese bank
Mitsubishi UFJ Financial Group will by a stake in the firm for $8.4
billion.
The Japanese bank will get 10 to 20 percent of Morgan Stanley, once the company's actual value can be ascertained.
"This strategic alliance with Mitsubishi UFJ can put Morgan Stanley in an even stronger position as we look to realize the opportunities we see in the rapidly changing financial marketplace," said John Mack, Morgan Stanley's chairman and CEO.
"Rapidly changing financial marketplace" may be something of an understatement. Both Morgan Stanley and Goldman Sachs, the last investment banks standing on Wall Street, have asked for, and received, permission from regulators to become commercial banks. That means they can accept deposits from consumer banking customers. It also means they must maintain a much stronger cash position than the did as investment banks.
Meanwhile, lawmakers are working with Treasury Secretary Hank Paulson and Fed Chairman Ben Bernanke on legislation to provide the largest corporate bailout in U.S. history. Though both liberal Democrats and conservative Republicans balk at the idea of taxpayers buying up $700 billion in mortgage backed securities, the debate at the moment appears to be only on how such a bailout would be structured and regulated.
Bernanke and Paulson are prodding Congress to act this week to approve the legislation and restore confidence in the credit market. But at a hearing on Capitol Hill today, the pair encountered some skepticism.
"We have been given no credible assurances that this plan will work," said Sen. Richard Shelby (R-AL). "We could very well send $700 billion, or a trillion, and not resolve the crisis."
