Morgan Stanley, Goldman Shares Plunge |
Wall Street is reeling from a series of blows that are coming from several directions at once. The mortgage mess precipitated the crisis and now the ripple effects are being seen in areas as diverse as majors selloffs in the stocks of the two remaining independent investment banks, Goldman and Morgan Stanley, as well as a major money market fund that has exposure to Lehman Bros. bonds, which are now valued at zero. What a tumultuous 10 day period in our country’s financial history. We are witnessing history being made before our eyes.
~~John Cronin~~
By Greg Morcroft, MarketWatch
Last update: 4:21 p.m. EDT Sept. 17, 2008
Tags: Goldman Sachs, Morgan Stanley, The ReserveNEW YORK (MarketWatch) - Outright fear gripped the U.S. financial sector on Wednesday and investors aggressively sold off shares of the two largest remaining U.S. investment banks, signaling a rapidly waning confidence in the structural integrity of the nation’s financial system.
Goldman Sachs and Morgan Stanley shares suffered their biggest one day losses ever, falling 19% and 27%, respectively. The shares are off 30% and 43%, respectively, for the week.
Investor worries are growing about brokers’ access to funding in the current environment, and the companies have been trying to scale back their balance sheets. Bear Stearns’ demise was driven by an unwillingness of its partners to trade with it.
The market remained beset as well by concerns about the fate of the freshly bailed out American International Group and fresh concerns about the solvency of money market funds after one of the largest in the country froze redemptions yesterday.
And, in another troubling development from the financial crisis, one of the original and largest money market funds has put a seven-day freeze on investor redemptions after the net asset value of its shares fell below $1, in an extremely rare instance in the fund industry of what is called “breaking the buck.”
Primary Fund, managed by New York-based money market fund inventor The Reserve, said late Tuesday that its $785 million holding of Lehman Brothers Holdings debt has been valued at zero.
While Primary Fund’s Lehman holding was small compared to the fund’s overall size, the fact that it froze redemptions reflects a surge in redemption requests by investorsThat news helped pressure shares of fund companies and online brokers, on concerns that investors might rush to make withdrawals in order to be sure their money is safe.
