Morgan Stanley: The colossus brought to its knees

UK Daily Mail
Friday, Sept 19, 2008

It is the second most powerful U.S. investment bank and an integral part of American financial history.

No one imagined that Morgan Stanley could ever be under threat.

But this week the Wall Street colossus has been in the speculators' firing line. Its share price plummeted and its boss, John Mack, was reported to have tried to engineer a merger with Citigroup.

Morgan Stanley dates from 1935 when, in the aftermath of the Wall Street crash and the Great Depression, American politicians forced conventional high street banks to stop acting as speculators.

Presciently, they were worried that risky speculation would lose depositors their money.

They made the banking giant JP Morgan split in two with Henry Morgan, grandson of the founder John Pierpont Morgan, joining Harold Stanley to set up the investment banking part of the business.

Ironically, during the Panic of 1907 when shares fell 50 per cent, John Pierpont had personally saved the U.S. financial markets by persuading a group of banks to inject cash into the system.

That crisis led to the creation of the U.S. Federal Reserve Bank.

Despite the report of a rescue package, it was still unclear whether the Fed would return the favour.

Full article here


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