UPDATE 1-Morgan Stanley, Goldman CDS spreads surge-Phoenix

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NEW YORK, Sept 16 (Reuters) - The cost of insuring the debt of Goldman Sachs (GS.N) and Morgan Stanley (MS.N) against default rose on Tuesday after the bankruptcy of Lehman Brothers LEH.N fanned worries about the health of other investment banks.

Credit insurance costs on other financial firms rose by 100 basis points or more as fallout from the deepening credit crisis spread, even threatening the survival of American International Group (AIG.N) , once the world's largest insurer by market value. For detail see [ID:nLG644711].

Five-year credit default swaps on Goldman jumped by 165 basis points to about 500 basis points, while Morgan Stanley 5-year CDS jumped by 275 basis points to 750 basis points, according to data from Phoenix Partners Group.

Goldman on Tuesday said third-quarter earnings plunged 70 percent as one of the worst market slumps ever weighed on banking and trading results. For details see [ID:nN16370705].

Merrill Lynch's MER.N credit default swaps rose by 120 basis points to 468 basis points, according to data from CMA DataVision. That means it cost $468,000 a year to protect Merrill Lynch's debt over a five-year period.

Credit default swaps on General Electric Capital Corp, the finance arm of General Electric Co (GE.N) widened by 160 basis points to 515 basis points, according to data from Markit Intraday.

(Reporting by Dena Aubin, Editing by Walker Simon) (dena.aubin@thomsonreuters.com; +1-646-223-6325; Reuters Messaging: dena.aubin.reuters.com@reuters.net))