INSTANT VIEW: Morgan Stanley, Goldman, trust banks tumble

NEW YORK (Reuters) - Spreading fears of a growing U.S. financial crisis dragged down shares of Morgan Stanley, Goldman Sachs and U.S. asset managers on Thursday.

Morgan Stanley, which tumbled as much as 45 percent lower to $11.85 in midday trading, was off 26 percent in early afternoon trading. Goldman Sachs fell nearly 11 percent to $102.

Shares of trust bank and asset manager State Street Corp slumped 15 percent on concerns of losses in its investment portfolio.

Northern Trust Corp fell as much as 32.3 percent, Bank of New York Mellon Corp as much as 34.7 percent and Federated Investors as much as 42.9 percent.

INDUSTRY REACTION: ALAN LANCZ, PRESIDENT OF ALAN B. LANCZ & ASSOCIATES INC, AN INVESTMENT ADVISORY FIRM, TOLEDO, OHIO

"The market hates uncertainty and Morgan Stanley is an uncertain situation. You're not going to have the market moving up anything significant with that uncertainty around."

ANTHONY CONROY, HEAD TRADER FOR BNY CONVERGEX, AN AFFILIATE OF THE BANK OF NEW YORK.

"There are no safe havens right now. There are so many moving parts and so many variables."

He said central banks' efforts to pump money into the markets were helpful, "but fear and greed dictate the short-term market and that's what we are living through right now. There's a lot of anxiety, and anxiety breeds volatility." TOM McCROHAN, ANALYST, JANNEY MONTGOMERY SCOTT LLC, PHILADELPHIA

"There is a combination of factors driving this. There is a spillover of the panic from earlier in the week.

"There is concern about capital levels at State Street.

"Bank of New York is known as a back-office securities processor for the broker-dealer community. It is also a large provider of tri-party repurchase agreements. It has a litany of products it offers broker-dealers.

"At Northern Trust, the concern may be its money market mutual funds, and its exposure to AIG and Lehman Brothers.

"It's no different from what we're seeing in other financials: shoot first, and ask questions later. There is guilt by association.

"Custody banks are much more focused on institutional investors and their balance sheets are considered less risky. But when dominoes are falling, portfolio managers are looking for the potential next group to fall, and custody banks have lower capital ratios than other types of banks." (Reporting by Jon Stempel, Steve Johnson, Ellis Mnyandu)