US Financial Crisis: Morgan Stanley as a Universal Bank



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Code : ECC0027

Year :
2008

Industry : Banking, Insurance and Financial Services

Region : US

Teaching Note: Available

Structured Assignment : Available

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History of Morgan Stanley Morgan Stanley as an investment bank traces its roots in another financial institution, J.P. Morgan, which stopped its investment banking business post Great Depression in 1934. Henry Morgan and Harold Stanley, two of the leading employees of JP Morgan, started their own investment bank Morgan Stanley (MS) in 1935. MS was a successful investment company right from the time of its inception. It had some extremely significant achievements to its credit...

Exposure of Morgan Stanley to the Subprime Crisis Traditionally, the mortgage bond market in the US was dominated by government-sponsored agencies such as FreddieMac.With the abolition of the Glass-SteagallAct in 19994, commercial banks were able to carryout transactions that were limited only to investment banks till then. With the foray of commercial banks with strong asset record into investment banking, activities like security underwriting and bond trading got a boost and these banks also started increasingly participating in the mortgage bond market. There was hectic activity in the mortgage bond market and increased participation of the private sector...

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Effects of the Financial Crisis on Morgan Stanley Amidst huge losses, MS was delicately balancing its position. However, the financial crisis had finally affected MS was evident from the fact that, several hedge funds shifted their assets from MS to commercial banks in September 2008, following Lehman Brothers' bankruptcy. This resulted in loss of tens of billions of dollars in MS' prime brokerage business.As prime brokerage was one of the most profitable and successful businesses, fleeing of hedge funds made MS vulnerable...

The Future of Morgan Stanley MS immediately took initiatives towards building new bank deposits. Its efforts included raising client awareness about banking services available through global wealth management group. It also accessed financing from the Fed. The bank planned to introduce new banking products in 2009, such as new savings account products and global currency accounts alongside what it offered already...








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