Morgan Stanley, one of the two last major American investment banks, is considering a merger with the Wachovia Corporation or another bank, according to people briefed on the discussions.
Morgan Stanley's chief executive, John J. Mack, received a telephone call on Wednesday from Wachovia expressing interest in the Wall Street bank. Morgan Stanley is considering other options as well. Other banks have also expressed interest in Morgan Stanley.
The talks are preliminary and no deal may emerge.
Wachovia declined to comment.
Shares of Wachovia fell 20.76 percent, or 2.39 percent, to $9.12; Morgan Stanley declined 24.22 percent, or $6.95, to $21.75.
As Morgan Stanley considers its options, the struggling savings and loan, Washington Mutual, put itself up for auction, people briefed on the matter said Wednesday.
The unsurprising announcement comes as the bank, which has suffered badly from losses on mortgages it had made, continues to stumble. Shares in Washington Mutual fell nearly 10 percent on Wednesday to $2.09; they have plunged 94 percent over the last 12 months.
Goldman Sachs, which Washington Mutual has hired, started the auction several days ago, these people said.