INSTANT VIEW: Morgan Stanley shares fall sharply

NEW YORK (Reuters) - Shares in Morgan Stanley (MS.N) plunged up to 42 percent and shares in Goldman Sachs Group Inc (GS.N) were down more than 20 percent in late morning trading on Wednesday on lingering worries about their ability to survive, and a day after both reported better-than-forecast results.

The following is reaction from industry analysts and investors:

WILLIAM SMITH, PRESIDENT OF SMITH ASSET MANAGEMENT IN NEW YORK

Goldman Sachs and Morgan Stanley reported "great" earnings. "But the thing is, it doesn't matter."

"I imagine you'll see them (Morgan Stanley) be owned by a bank this weekend. You won't see them fail, but you could see more shotgun marriages."

"You can target a company, spread rumors, short the stock and win every single time. These guys are levered and having a field day, and no one is stopping them right now."

"Goldman came out and earned money yesterday, but we're just in a period right now where they are going to keep attacking the individuals, and they're going to keep doing it until they get them to break."

ANGEL MATA, managing director of listed equity trading, Stifel Nicolaus Capital Markets

"What's happening to the rest of the financials... Morgan Stanley are they the next one up in the queue? What does tomorrow bring, will it start spilling over into consumers, will there be runs on banks, there's a million things going on."

ANDREW BRENNER, SENIOR VICE PRESIDENT, MF GLOBAL, NEW YORK

"Seems like the SEC is a day late on the rule ... Morgan Stanley is clearly in the short sellers' sights."

JOHN O'BRIEN, SENIOR VICE PRESIDENT AT MKM PARTNERS LLC IN CLEVELAND

"The fear is who is next. It almost feels like people scour the books and say who is the next likely target that we can put a short on and that spreads continuous fear."

WALTER TODD, PORTFOLIO MANAGER, GREENWOOD CAPITAL ASSOCIATES, GREENWOOD, SOUTH CAROLINA, ABOUT $1 BILLION OF ASSETS UNDER MANAGEMENT

"It was a good quarter for Morgan Stanley, and the way people are raiding these companies on the short side, it creates a self-fulfilling prophesy. As a long-only investor, its very frustrating to watch. I wouldn't lose faith in Morgan Stanley based on what I saw in the results, but I look at the stock price down this much, and I wonder if I'm missing something. I don't own this stock."

WILLIAM LARKIN, FIXED INCOME MANAGER AT CABOT MONEY MANAGEMENT IN SALEM, MASS