Japan's Largest Bank Buying Stake in Morgan Stanley
Monday, September 22, 2008; 9:48 AM
Morgan Stanley will receive an infusion of capital from the largest bank in Japan as the troubled Wall Street bank continues a dramatic scramble to improve its chances for survival.
Morgan Stanley plans to sell between 10 and 20 percent of its shares to Mitsubishi UFJ, according to a statement from the Japanese company this morning. Mitsubishi will invest up to $8.4 billion in the deal.
The announcement comes less than 12 hours after Morgan Stanley received permission from the Federal Reserve to become a bank holding company, transitioning from its traditional business as an investment bank. Wall Street rival Goldman Sachs also will make the transition.
The change gives the two banks the benefit of the federal safety net that protects commercial banks, including the ability to offer insured bank accounts, but it places them under stricter regulations, one of which requires them to hold more capital relative to their portfolio of investments.
The Mitsubishi deal gives Morgan Stanley an immediate boost in its efforts to raise that capital.
It might also ease pressure on the Wall Street bank to search immediately for a commercial bank to buy or merge with.
The Dow Jones industrial average was down about 70 points in early trading today. Morgan Stanley was up 13 percent to 30.63. Goldman Sachs was up 2 percent to 131.74.