DealZone

In a mutual exchange of affection that would make Barney the Dinosaur proud, rivals Goldman Sachs and Morgan Stanley each issued research notes today praising each other’s business models and stability, following a week that saw shares in both stalwart investment banks swoon and some of their rivals fail.

Goldman’s note, issued this morning, got the lovefest going. It said that the decline in Morgan Stanley’s stock was “exaggerated” by those naughty short sellers. It praised Morgan Stanley as “well positioned to capitalize on future opportunities,” and said, “We believe Morgan Stanley is sound as an on-going entity, ” Not exactly poetry, but heartfelt.

Morgan Stanley reciprocated with its own note about Goldman that said, “business model fears are overdone,” and that “GS has the necessary breathing room to address these questions in a more reasoned manner.”

Both banks may have a reprieve from the stress of shotgun weddings after the U.S. government began crafting a bailout that would curbed short-selling, guaranteed money-market mututal funds and mop up toxic mortgage debt.

Still, Morgan Stanley may find its way into the arms of partners as it continues to hold talks with a number of suitors — just at a less frantic pace.