Morgan Stanley or Goldman Sachs - who goes bankrupt first?

By admin | November 3, 2008

We’ve all heard the of the financial escapades with Bear Stearns, Indy Mac and the Federal Reserve system. We all understand that the system is currently crippled and that there are more “dead banks” in the water. (You can read about “Vultures Circling the Fed” HERE)

(This article gets reposted today)

So - with all that’s going on in the financial world - who’s going to drop first?

It is a forgone conclusion that SOMEBODY is going to drop. According to a Bloomberg report today, leading eoconomist Kenneth Rogoff stated, “We’re not just going to see mid-sized banks go under in the next few months, we’re going to see a whopper, we’re going to see a big one - one of the big investment banks or big banks.”

Now, doesn’t that make you feel all warm and cuddly inside? I mean, how can ANY bank go under? Who’s money are they stealing anyway? (If you’re an American taxpayer, the answer to that question is - YOU!)

According to the Securities and Exchange Commission - Morgan Stanley and Goldman Sachs are in MAJOR TROUBLE.
The criteria used is called “Capital Multiple” - basically it is the total net capital divided by minimum capital requirement. When investors are given a choice, they should always use brokers that have higher capital multiple. The higher the capital multiple, the better off the financial institution is to withstand losses.

Here are 17 major brokerage firms and what their capital multiple looks like:

Edward Jones - 19.9

Bank of New York Mellon - 15.8

T.Rowe Price - 13.98

Scottrade - 13.86

OptionsXpress - 12.65

Raymond James - 11.92

Merrill Lynch - 8.62

Fidelity - 7.93

Bank of America Securities - 5.97

ING Direct - 5.85

Schwab - 5.85

Lehman Brothers - 5.43

E Trade - 5.00

TD Ameritrade - 4.72

Citi Smith Barney - 4.06

Goldman Sachs - 3.90

Morgan Stanley - 3.21

Now - I don’t know where you put your money, but if I were in your shoes - and I had money in either Goldman Sachs or Morgan Stanley (be it stocks or whatever) - I WOULD GET IT OUT RIGHT NOW!