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Anatomy of the Morgan Stanley Panic
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An exceptional journalism story of what happened on Sept 16 and September 17, 2008, and the aftermath, by Pulliam, Rappaport, Lucchetti, Strasburg and McGinty, when Morgan Stanley stock lost more than half its value and was at risk of collapsing. What caused the collapse in price? This article shows how the biggest names in financial institutions were buying protection with credit default swaps, and as the price of these swaps skyrocketed on Sept 16 and Sept 17, the shortselling in Morgan Stanley's shares also skyrocketed. Shortselling on Sept 17 reaching nine times the normal, with 39 million shares sold short adding to the 31 million shares sold short in the prior two days, according to trading records examined by WSJ. It was at this point, on the pleas of John Mack CEO of Morgan Stanley, the SEC stepped in to temporarily suspend short selling. It is hard to clearly isolate the shortselling that went on for protection, from the shortselling for speculation, but hedge funds were involved and some of the shortselling was done to make a quick profit. Citigroup has faced the problem of losing half the share's value in a couple of days in the week of November 17, and shortselling in Citigroup's shares contributed to the collapsing stock. See the 3 graphs setup to show the influence of credit default swaps on short selling, and the on share price for Morgan Stanley. On Monday November 24, the government announced a rescue plan for Citigroup. That the uptick rule has not been reinstated as yet, means that when one looks back at this period a few years from now it will show errors in handling this economic and financial markets crisis were made, different from that in the 1930's, but with serious consequences.
John Mack, CEO of Morgan Stanley at the time of the 2008 financial crisis
10/09/2008
Grouped Articles
Anatomy of the Morgan Stanley Panic
Wall Street Journal 11/24/2008
At Moment of Truth, U.S. Forced Big Bankers to Blink
Wall Street Journal 10/15/2008
New York Times 10/10/2008
A Defiant Mack at Morgan Stanley Throws Punches
Wall Street Journal 10/09/2008
Morgan Stanley Memo by John Mack
Wall Street Journal 10/14/2008
Longest Days of the 2008 financial crisis (1)- October 13, 2008, 3.00 pm at the Treasury Building, Washingon D.C., a meeting for $125 billion capital injection into U.S. banks
10/15/2008
Treasury Secretary Paulson meets the heads of major U.S. banks at the Treasury Building. Only Paulson, Fed chairman Bernanke, Sheila Bair of FDIC, and Geithner of the New York Fed on the government side knows why they are meeting. Termsheets are handed out and returned signed.
Grouped Articles
At Moment of Truth, U.S. Forced Big Bankers to Blink
Wall Street Journal 10/15/2008
Anatomy of the Morgan Stanley Panic
Wall Street Journal 11/24/2008
Obama, Geithner Get Low Grades From Economists
Wall Street Journal 03/11/2009
Dream Mortgage Bailout Has a Darker Side
Wall Street Journal 04/03/2009
Wall Street Journal 04/06/2009
Globalization: Capitalism Should Be Nicer | ZEIT ONLINE
ZEIT ONLINE 07/29/2016
Morgan Stanley and the mortgage crisis of 2008
10/10/2008
Grouped Articles
Morgan Stanley Memo by John Mack
Wall Street Journal 10/14/2008
New York Times 10/10/2008
Anatomy of the Morgan Stanley Panic
Wall Street Journal 11/24/2008
Financial Crisis Suit Suggests Bad Behaviour at Morgan Stanley
New York Times 01/23/2013
The Uptick Rule and Short selling abuses in the U.S.
07/28/2008
The suspension of the Uptick Rule and the S.E.C.'s dire lack of enforcement all seem to suggest that the regulatory mission of the S.E.C. has been influenced by those who are being regulated. Conservatives running the government and regulatory agencies mistakenly assumed that lower regulation was somehow part of the new system of free enterprise that was delivering results. As long as the economy did well they saw no reason to question this, and in fact let regulation wither to the extreme provoking the crisis by letting excesses develop and accumulate. The abuses of excessive leverage under a Fuld at Lehman and of mortage sales under a Mozilo at Countrywide were barely understood by Cox and company at the SEC till they undermined the very foundations of free enterprise.
Grouped Articles
SEC Tries to Rebuild Its Reputation
Wall Street Journal 09/12/2013
Agency Subpoenas Focus on 4 Rumors That Hit Lehman
Wall Street Journal 07/28/2008
Wall Street Journal 08/21/2008
NYSE Chief Leans Toward Uptick Rule
Wall Street Journal 10/02/2008
U.K. Will Continue Ban on Short Selling
Wall Street Journal 10/23/2008
Citigroup Tries to Stop the Drop in Its Share Price
New York Times 11/21/2008
Longest Days of the 2008 financial crisis (2)- Panic, possible collapse and survival of Morgan Stanley, Sepember 16-17, 2008
10/10/2008
Grouped Articles
Anatomy of the Morgan Stanley Panic
Wall Street Journal 11/24/2008
Morgan Stanley Memo by John Mack
Wall Street Journal 10/14/2008
New York Times 10/10/2008
How debt can suddenly sink firms as business swings lead to a drying up of business.
10/14/2008
It can happen to GM and Chrysler, and a near miss for Ford and Morgan Stanley. Goldman Sachs is only pretending that it did not have a near miss after Lehman's collapse. The same can happen to an architectural firm Yamasaki as corporate real estate market collapses in 2009. The volatility and nervousness in financial markets in 2008 that shut companies out of credit markets and led to the government led auto industry bailout with planned bankruptcy filings.
Grouped Articles
A Warning Light to Alert the I.M.F.
New York Times 09/21/2011
After a Financial Flood, Pipes Are Still Broken
New York Times 09/14/2013
Morgan Stanley Memo by John Mack
Wall Street Journal 10/14/2008
Anatomy of the Morgan Stanley Panic
Wall Street Journal 11/24/2008
Wall Street Journal 03/14/2009
Morgan Stanley Comes Up Golden
Wall Street Journal 07/22/2011
The impact of rumors on share prices of financial stocks during the crises of 2008 and volatility in 2011-2013
10/10/2008
The impact of rumors on the share price of Morgan Stanley and other stocks.
Grouped Articles
QE2-Inspired Stock Rally May Soon Disappear
Wall Street Journal 08/08/2011
U.S. Bank Stocks Regain Their Allure
Wall Street Journal 01/06/2014
Morgan Stanley Memo by John Mack
Wall Street Journal 10/14/2008
New York Times 10/10/2008
Anatomy of the Morgan Stanley Panic
Wall Street Journal 11/24/2008
Morgan Tries To Quell Rumors About Its Stock
New York Times 10/05/2011
The Uptick Rule and how it could have prevented the kind of shortselling that almost killed Morgan Stanley.
10/02/2008
Shortselling, the uptick rule and the collapse in share price at Morgan Stanley and later in November 2008 at Citigroup.
Linked Articles
NYSE Chief Leans Toward Uptick Rule
Wall Street Journal 10/02/2008
Anatomy of the Morgan Stanley Panic
Wall Street Journal 11/24/2008
Uptick Rule and the Bear Raids by Short Sellers on Morgan Stanley and Citigroup.
11/18/2008
Bear Raids on Morgan Stanley and then in late November on Citigroup. How the Uptick Rule should have been reinstated and the psychological crisis created by huge shortselling and the spreading of false rumors for quick profits. The dangers of this to the US and the global economy and the mystery why no action has been taken so far.
Linked Articles
Anatomy of the Morgan Stanley Panic
Wall Street Journal 11/24/2008
There's a Better Way to Prevent 'Bear Raids'
Wall Street Journal 11/18/2008
The collapse of share price at Morgan Stanley and Citigroup as short sellers wreak havoc.
11/22/2008
What short sellers are doing to destroy value in large financial institutions and the failure of the government and the SEC to reinstate the uptick rule remains a glaring omission.
Linked Articles
Shares Falling, Citigroup Talks to Government
New York Times 11/22/2008
Anatomy of the Morgan Stanley Panic
Wall Street Journal 11/24/2008
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