Morgan Stanley was weighing a merger with Wachovia Corp. and several other banks after its shares sank 42 percent this week, people familiar with the matter said.
John Mack, Morgan Stanley’s chief executive, received a call from Wachovia on Wednesday indicating interest, said one of the people, who declined to comment because the talks aren’t public and may end without an agreement. Such a deal is one of several options being considered and the New York-based firm is also seeking ways to limit short sales of its stock, according to the source.
“The smartest people at this firm are focused on solutions,” said Mark Lake, a spokesman at Morgan Stanley. Wachovia spokeswoman Christy Phillips-Brown said it was the bank’s policy not to comment on “market rumors or merger speculation.” The shares of Morgan Stanley and Goldman, the biggest U.S. securities firms, tumbled the most in at least a decade after a government rescue of American International Group Inc. failed to ease the credit crisis. The cost to protect against a default by the Wall Street firms rose to a record.
“They’re fish in the barrel, the short sellers have them targeted,” said William Smith, of Smith Asset Management Inc. in New York.
