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BEHIND THE MONEY: Goldman or Morgan Stanley...Who's Telling the Truth?

Wednesday, 12 Nov 2008 | 2:10 PM ET

ISN'T IT IRONIC?

About 45 minutes before Fast Money was set to begin last night, we started to get some headlines from Goldman Sachs CEO Lloyd Blankfein speaking at the Merrill Lynch Financial Services conference taking place here in New York. They were largely ignored by most of the business media, but we decided to make them our lead.

The headline that really struck me was this one: "Goldman Sachs: Bank Holding Status Won't Change Strategy."

It became our top story of the night for two reasons: One, Goldman sharply rebounded in the middle of the day yesterday and now we knew why. And two, this comment directly contradicted the widely-accepted notion that the Wall Street business model as we know it...is dead.

Well, according to Blankfein, who is now the steward of a highly-regulated bank holding company, it is not. The CEO reportedly put up a chart showing Goldman's return on equity since going public in 1999 versus its leverage ratios during that same period. They were not highly correlated, he pointed out, therefore high leverage was not key to generating high returns.

Huh, that's funny. Then why did Morgan Stanley management say the exact opposite, from the very same podium this morning? Management there says the new risk environment will shave 3 to 5 percentage points off the firm's return on equity.

It seems the market believes Morgan Stanley. Both stocks are off more than 8% as of 1:40 p.m. New York time. And we stand by our decision to go with "Goldman Sticking to Guns" as our lead.

SOMETHING TO WATCH FOR TONIGHT

We've been covering on a nightly basis the different scenarios that may unfold if General Motors did indeed get taken over by Uncle Sam. For the latest analysis on the subject from Jon Najarian, co-founder of Optionmonster.com, click here.

But tonight, we take that one step further and look at what kinds of wonderful vehicles that may be created by this state-run automaker. We have a nice history put together of the fine automobiles produced by past governments. Think puke-brown colors, boxy chassis and roomy glove compartments for all your socialist propaganda.

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