HONG KONG Oct 10 Moody's Investors Service has
warned it may cut the long-term debt ratings of Morgan Stanley
(MS.N) and Goldman Sachs (GS.N) as well as those of their units,
in a sign the global financial crisis is deepening.
The rating agency said it had placed Morgan Stanley's A1
rating on review for a downgrade while assigning a negative
outlook to the Goldman Sachs Aa3 rating.
Lower ratings would increase the cost of borrowing for the
The warnings came even as governments across the world
pledged public funds to shore up the capital of banks, as credit
markets remained in deep distress amid a financial crisis which
is now almost a month old.
Just ahead of the Moody's announcement, Mitsubishi UFJ
Financial Group (8306.T), Japan's largest bank, said it had no
plans to pull out of a planned $9 billion investment in Morgan
Stanley despite the Wall Street bank's shares losing a quarter of
their value on Thursday alone.
The rating agency's actions do not come as a surprise given
the cataclysmic change in the landscape on Wall Street.
Late last month, Goldman Sachs and Morgan Stanley stunned
Wall Street when they became commercial bank holding companies
after worries grew about their ability to fund themselves and
investors lost confidence in their high-risk brokerage model.
Morgan Stanley declined to comment and Goldman Sachs
spokesmen in the United States could not immediately be reached
Becoming bank holding companies gives the two firms access to
federally insured deposits but also subjects them to greater
Goldman has unveiled deals to raise $15 billion from Warren
Buffett's Berkshire Hathaway (BRKa.N) and public investors.
(Reporting by Umesh Desai; Editing by Nick Macfie)