Morgan Stanley, as of 2Q11 data, seems like it can weather its obligations but the short-term liquidity considerations are key.
Liquidity reserves are up 50% since the ’08 crisis.
Leverage is way down.
Riskiest debt is down.
And as long as European debt issues don’t drag down all of Europe, foreign exposure seems manageable.
Two other factors are key.
1) Short-term liquidity. MS is still a bank so presumably the Fed can lend a hand (political will a factor).
2) Mitsubishi. The second backstop for a MS crash is Mitsubishi which has deep pockets and an apparent willingness to stand by its partner.
All that together makes it seem like Morgan Stanley will be fine. Of course a lot of people said that in ’08.
