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It would have costed the "taxpayers" much more than $138bn if the system collapsed.
I really don't understand all these people that cry foul without really knowing what is going on.
The CDS (Credit Default Swap) market is a $62 trillion ($62,000 billion or $62 million millions) mkt. Letting Bear, Freddie and Fannie, Lehman, AIG or any other big institution fail big time will likely unravel the whole system.
You can let this happen. Period.
Is this Moral Hazard? Maybe actually hell yes.
Were mistakes made and too risky positions taken? Yes
Are the authorities (read Fed and Govts) to blame for letting this go out of control? Yes
Have the investments banks, commercial banks, insurer, real estate developers, real estate speculators, mortgage brokers, mortgage borrowers and verybody else acted on greed and for their own benefit? YES
The toy is broken, but right now we cannot afford to throw it away. We need to try and fix it. And for a while a Govt guarantee seems to be working...
The day I worry is when CDS on US Treasuries will start trading in the 100s, the $ gets spanked, and people lose their faith in the US system...
Then we are all in trouble...
You see taxpayers money is a fictional concept when you can just print it, isn't it? The drawback of that is inflation, but with crude down 40% in 3 months and the economy heading straight for a recession I think the authorities are just saying "screw" inflation and lets save the system.
Yesterday the Fed didn't cut the rates (i.e. did not print more money) and talked tough hoping to curtail some of the moral hazard.
It worked for a couple of hours with the stock mkt rallying... we'll see today.
To go back to the original poster question I agree with Competentone. You need to understand where your money is invested. Morgan Stanley's health as an institution as only an indirect effect on the value of your portfolio.
Unless you have given them strict guidelines you'll be down quite a bit, like everybody else.
It's funny but 18 months ago if you were not making 10+% return on your capital you were an idiot. With Fed funds at 2% I used to wonder if people realized the risk they were taking on... you just do not make money from nothing...
Well all these people that were making 10-12-11-14% returns in the last years are wondering now who's fault it is, blaming the CEOs of the big companies and the poor bastards that defaulted on some mortgages because they could not feed their families....
We had it good for too long. This correction was overdue. Let's just hope we do not end up with no capital markets.
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