Bailout datapoint of the day, Morgan Stanley edition

By Felix Salmon
December 2, 2010
ProPublica is my favorite one-stop shop for presenting the Fed data dump in an at-a-glance format. The main thing that jumps out is that three banks, more than any others, were the primary recipients of the Fed's lending facilities:

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ProPublica is my favorite one-stop shop for presenting the Fed data dump in an at-a-glance format. The main thing that jumps out is that three banks, more than any others, were the primary recipients of the Fed’s lending facilities:

bailout.tiff

I’ve included the banks in positions 4 and 5 just to make clear how big the gap is here: Citi, Merrill, and Morgan Stanley each borrowed more than $2 trillion from the Fed in total. No one else borrowed even $1 trillion.

Of course, a lot of these were overnight loans being rolled over day after day: it’s not like the Fed ever lent this much money at any one time. But the sums involved are still astonishing, especially for Merrill Lynch and Morgan Stanley. We all know what happened to Citi and to Merrill, but this underlines just how rocky Morgan Stanley was at the height of the crisis.

The only time I’ve ever got a genuine death threat from my blogging was when I wrote this, on October 9, 2008:

It looks like we’re getting close to one of the market’s vicious syllogisms here: without the market’s trust, Morgan Stanley is nothing. The market doesn’t trust Morgan Stanley. Therefore, Morgan Stanley is, well, toast.

My guess is that at some point over the weekend, Hank Paulson will announce that he’s using his new authorities under the TARP to effectively nationalize Morgan Stanley, following Gordon Brown’s lead in the UK. And Morgan Stanley will only be the first of many banks to suffer such a fate.

I was right about the government stepping in to save Morgan Stanley from a vicious market where it couldn’t stand alone; I was just wrong about which arm of the government would be intervening. It wasn’t Treasury, it was the Fed.

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