Morgan Stanley has sold 3B of CDs.

Nov.12, 2008 in Market Outlook

MS has sold 3B of CDs. So this is the new business model. Instead of borrowing from the commercial paper market, these newly minted “banks” are gonna use proceeds from CDs and make leveraged bets. Actually a quite interesting model. The CD are stable funding sources that can bring them more staying power. But I still think these IBs should go back to partnership business model as it aligns the risk and reward closer to the people in charge.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aS9rdkryIYHY&refer=home

By Christine Harper

Nov. 12 (Bloomberg) — Morgan Stanley plans to fire 10 percent of its institutional securities staff and 9 percent of the firm’s asset-management group as the economy contracts and client demand wanes.

The cuts are in addition to headcount reductions disclosed earlier this year, Chief Financial Officer Colm Kelleher said today at a banking conference in New York hosted by Merrill Lynch & Co. Morgan Stanley, which converted from the second largest U.S. securities firm into a bank holding company in September, is recruiting retail banking professionals and will pursue “targeted acquisitions,” among retail banks, Co-President James Gorman said.

The New York-based firm shrank total assets to “significantly” below $800 billion by the end of October, Kelleher said. The company aims to fund 50 percent of its holdings with equity, long-term debt and deposits.

The plans were included in documents on the firm’s Web site that accompanied today’s presentations. The slides show that 33 percent of the firm’s assets are funded with equity, long-term debt and deposits currently, up from 21 percent in 2007. Total assets have dropped to below $800 billion from $987 billion in the fiscal third quarter as the firm reduces its leverage.

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