Morgan Stanley is not going to be the next MF Global.
I still do not understand how Morgan Stanley was able to reduce its European exposure by as much as it claims. And I still wonder if some of this reduction may not be as solid as Morgan Stanley believes, especially if done through hedging agreements with other financial companies that may be in poor health themselves.
But Morgan Stanley is not MF Global. It has a key advantage that MF Global did not have. It will, I believe, be supported by the Federal Reserve with liquidity facilities that will allow it to prevent any temporary liquidity problems from morphing into solvency problems. It is still too big to fail, and the Fed will act as a lender of last resort.
The entire U.S. financial sector may remain under pressure for quite some time. Morgan Stanley may perform even worse than many of its rivals. But Morgan Stanley just isn't going out of business anytime soon.
Those are dangerous thoughts for someone at CNBC to have. People are still yelling at Jim Cramer for what they think he said about Bear Stearns.
Here I'm actually saying it: Morgan Stanley is not going to be swiftly taken down like MF Global. This is not September 2008, Morgan Stanley is not Lehman Brothers, Tim Geithner is not Hank Paulson, and Barack Obama is not George W. Bush. Remember, Geithner was the guy who wanted to guarantee all bank debt in 2008.
That's not to say we won't see any more failures in leveraged financial companies. I'm certain we will. But I don't think Morgan Stanley will be one of them, at least not unless the situation in Europe gets much, much, much worse.
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