Wall Street entered into another round of speed dating, with bankers representing Morgan Stanley and Washington Mutual scrambling to put together deals in the biggest realignment of the financial industry since the 1930s. Once vaunted investment banks like Bear Stearns, Merrill Lynch and amp; Co. and Lehman Brothers Holdings Inc. have lost their independence or been toppled at a breath-taking pace. And for a time on Thursday, fears intensified that the spreading credit crisis threatened to drag down the remaining global financial institutions and Main Street banks alike. Shares of financial stocks initially plunged, then recovered as part of a dramatic afternoon reversal for most stock indexes after CNBC reported that Treasury Secretary Hank Paulson might back the creation of a new Resolution Trust Corp. to soak up bad loans and defaulted mortgages, their shares reversed course. Treasury officials declined comment about whether that report was accurate. Morgan Stanley slumped more than 46 percent in early trading as investors fretted about its ability to quickly find a buyer or cash infusion from a foreign investor. Rival Goldman Sachs Group Inc. skidded 25 percent. Morgan Stanley shares rallied to close up about 4 percent while Goldman Sach's stock was lower by almost 6 percent. And Washington Mutual Inc. shares soared more than 48 percent. Sen. Charles Schumer also spoke out Thursday in favor of creation of a government-sponsored agency that would absorb and then dispose of the toxic investments from the banks. It could be similar to the RTC that the government created during the savings and loan crisis of the 1980s. That might provide the lifeline needed to help prop up the ailing banks and investment banks, said Anthony Sabino, professor of law and business at St. John's University. He notes, however, that CEOs might still go ahead with deals they believe make sense. “This is history repeating itself,” he said. “The debacle of the S and amp;L crisis created the RTC, and we are faced with a similar crisis because we didn't learn from history. This is yet another lifeline.” But the question is whether such a plan could be turned into reality soon enough to take the pressure off Morgan Stanley and Goldman Sachs to do deals. “People are finally realizing that we are probably in the worst financial crisis since the Depression,” said Alfred E. Goldman, chief market strategist for Wachovia Securities, a 49
