The Wall Street Journal reports that Morgan Stanley was on the 'brink of failure' just two days after the fall of Lehman Brothers in September, after false rumors were circulating that Deutsche Bank had pulled a $25bn credit line.
According to the newspaper, which says that it has reviewed trading records, firms like Deutsche, Merrill Lynch and UBS were protecting themselves against potential losses via credit-default swaps, which, in turn, triggered massive opportunistic short-selling in Morgan Stanley stock. False rumors were also triggering stock sales. In addition to the false Deutsche Bank credit line rumor mentioned above, stories were flying that Morgan Stanley had $200bn out in exposure to troubled insurer AIG. CEO John Mack told staff at the time: 'I know you are all watching our stock price today, and so am I......We're in the midst of a market controlled by fear and rumors, and short sellers are driving our stock down'. US regulators are now said to be trying to uncover who was doing what, and why.
And The New York Times reports that some Bank of America shareholders are seeking professional help as they bid to try and put a stop to the bank's intended merger with Merrill Lynch. Many apparently feel that current economy realities at the very least mean that the terms of the deal need to be revisited. Others feel that the deal will simply be a drag on earnings, and that the last thing BofA needs now is more investment bankers.
Dow Jones reports that Barclays Capital is said to be axing up to 50 staff in leveraged loans, sales and IT in Europe as the economic downturn begins to bite.
Finally, The Financial Times reports that former Lehman Brothers bankers now at Nomura will wait until April (when the first part of retention bonuses are thought to be paid) before deciding whether to cut and run. The newspaper says that there are still worries around culture, in particular whether the Japanese firm is truly a meritocracy which will allow the Lehmanites to thrive.
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