Morgan Stanley CEO John Mack may be going back hat-in-hand to the Chinese sovereign wealth fund that
propped up the bank with a $5 billion investment last December. Bloomberg
is reporting that the U.S. investment bank is in talks with China Investment Corp. about taking as much as a 49% stake in the investment bank.
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At the same time, Morgan Stanley is reportedly in possible merger talks with
Wachovia Corp., as its management tries to stop Wall Street's sliding
confidence in the ability of the bank to survive the current market
turmoil.
Adding to the chances of a deal is the presence of CIC's president, Gao Xiqing, in
the U.S., the Financial Times reported Wednesday. Wei Christianson, who runs Morgan Stanley's
business in China, is also in the U.S. While there are no
regulations preventing a foreign investor from taking over Morgan -- the
wealth fund already owns a 9.9% stake -- such a deal is highly unlikely
to pass muster politically, especially during an election year.
Nevertheless it looks increasingly likely that Morgan Stanley will have
to do a deal in order to hold off a painful selloff of its shares, which could force a massive restructuring or worse.
Investors are running from the debt of both Morgan and Goldman, Sachs
& Co. as if it were radioactive while the stock continues to get
pounded. The cost of a credit default swap on Morgan briefly topped
1,000 basis points Wednesday, making the cost of insuring against
default on $10 million of the investment bank's bonds an astonishing $1
million. -
George White See Bloomberg story
See Crisis on Wall Street Dealwatch
