It Only Took $107 Billion of Federal Reserve Loans to Save Morgan Stanley
According to Bloomberg the Fed extended total loans of $107.3 Billion to Morgan Stanley in October of 2008 to save it from bankruptcy. This was a component of $1.2 Trillion in credit extended across Wall Street to prevent a global financial collapse following the demise of Lehman Brothers.
Link to article: Morgan Stanley at Brink of Collapse Got $107B from Fed
One wonders how much money it would have taken to salvage Lehman and prevent the resulting cascade of panic? But the Fed decided that Lehman Brothers was not "Too Big to Fail" and did not represent a systemic risk.
Today's article jogged my memory back to an email sent to a Manhattan resident on October 10, 2008 indicating my belief that the demise of Morgan Stanley was imminent. I feel better knowing that the evaluation of MS' prospects was only wrong as a result of the largest emergency loan ever extended to a single company in human history.
Email text from 10/10/08 included below:
"Did you read my response to the WSJ article? The fundamental problem we face is real estate is overvalued. Falling prices, which can't be stopped, will crush consumer spending, undermine confidence, lock up lending, etc.... until we hit equilibrium. Normally that would take years. Hopefully this weeks fireworks will force a 30% drop in the next 12 months. It will be horrible but we can bounce back. Otherwise it will take years. People were focused on the credit markets. Now they are focused on the stock market. By Xmas they will be focused on consumer spending. Next year it will be business failures and unemployment.
I don't think Morgan Stanley survives the weekend. And I think Goldman Sachs will be Nationalized.
None of the 36 bailouts to date have done anything other than make things much worse.
All I can tell you is avoid debt, hoard cash and 5 years from now the world will belong to smart people, who didn't buy internet stocks and spec condos. But until then it is going to suck..
Starting to think about moving to Hawaii or Thailand to ride this thing out for the next several years.
Hope you are well otherwise.
BTW, I think manhattan real estate is going to decline by more than 50% in the next several years. Start saving."
Wow Whitney: VERY prescient ! And who knew QE1 and QE2 would jack-up the stock market? Which will probably make the 'fall' even more drastic. And who knew fed currency debasement would make gold DOUBLE in 33 months!
Hey, I don't feel comfortable living in 'interesting times' to this extent!!!!
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