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 Forget the stock price. More worrisome signs are coming from the credit derivatives market, which is betting there's big trouble in store for the two surviving pure-play investment banks -- Morgan Stanley and Goldman, Sachs & Co.
Credit default swaps -- a measure of how likely the market thinks the
issuer is to default on its debt -- are trading at an 800 basis point
spread for Morgan Stanley. To put that into context, spreads on Monday
hit their all-time record of 453 basis points. Goldman's CDS, for its
part, is around 500 basis points wide, compared with a record spread of
318 noted on Monday. In fact, Goldman's CDS is actually wider than
Lehman's spread only one week ago, according to Aleablog.com. A credit
default swap is like an insurance policy for debtholders that pays off
if the bond issuer defaults. - George White and Vipal Monga Categories Deal Video
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