Sunday July 20, 2008

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Morgan Stanley Latest to Accept Foreign Aid

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Another major American financial institution went on the international auction block Wednesday afternoon as Morgan Stanley announced it was accepting a $5 billion cash infusion from China Investment in return for a stake in the bank estimated to be as high as 9.9 percent. The Chinese company will be a passive investor and will not have a seat on its board or a role in management.

Morgan, one of the nation's largest investment banks had earlier in the day reported a huge fourth-quarter loss tied to an unexpectedly large $9.4 billion write-down in mortgages and other assets. This was nearly twice the $5 billion loss that analysts and market-watchers were expected as the bank went on the offensive to write down its exposure to losses from derivatives and mortgage securities.

The next shoe to drop will be the announcement of quarterly earnings from Bear Stearns expected on Thursday. Analysts are looking for projected fourth-quarter results to be a loss of about $1.79 per share. Bear Stearns was one of the first of the big financial institutions to signal that its investments in the mortgage sector were probably going to come to no good end.

Morgan Stanley's stock was trading near $50 a share after the announcement of the Chinese infusion. The stock had hit $47.90 earlier in the day.