1. Bailout Amounts and Placement on the FSB List of Too-Big-To-Fail Banks
Morgan Stanley received $10 billion in bailout funds1 in the 2008-09 financial crisis.
Morgan Stanley is listed by the Financial Stability Board as a systemically important financial institution.2 The Financial Stability Board is an international body that monitors3 the global financial system and is made up of members from the G20 nations.4
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In November 2012, the Financial Stability Board listed Morgan Stanley as one of 28 banks whose failure could cause serious systemic financial/economic problems.5
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Morgan Stanley's placement on the list is in the third tier used for 2012, which indicates that it is among the 14 most critical financial institutions in the global economy. Banks in this category are required by the FSB to have a level of capitalization that is quite low, at 1.5%.
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FDIC Vice Chairman Thomas Hoenig, testifying before the House Financial Services Committee on June 26, 2013, said the biggest Wall Street banks are “woefully undercapitalized,” while calling the industry underpinnings a “very vulnerable financial system.”
2. Derivatives Holdings
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Morgan Stanley holds $2.702 trillion (notional value) in derivatives, and appears in position 7 of 25 top banks holding derivatives.6 During Chapter 11 bankruptcy in the U.S., derivatives counterparties receive "super-priority" status above all other creditors, including depositors. This means that derivatives counterparties will get all of the bank's assets before any other creditors, including depositors, are paid.7
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Due to the contagion effect8 of our fractional reserve banking system and Morgan Stanley's significant investments in derivatives, deposits held with Morgan Stanley may be vulnerable. Wells Fargo's failure could have a significant impact on our economy in Washington, DC. As noted below Morgan Stanley holds a significant share of deposits for the government of DC.
1 JP Morgan Chase June 17, 2009, http://www.morganstanley.com/about/press/articles/b7cf5f77-5b47-11de-96f6-3f25a44c9933.html
2Financial Stability Board, http://www.financialstabilityboard.org/publications/r_111104bb.pdf
3 Financial Stability Board, http://www.financialstabilityboard.org/about/mandate.htm
4 Financial Stability Board, http://www.financialstabilityboard.org/members/links.htm
5 Financial Stability Board, http://www.financialstabilityboard.org/publications/r_121031ac.pdf
6 Office of the Comptroller of the Currency, http://dcpublicbanking.org/wp/wp-content/uploads/2013/08/OCC-1Q13-Top-25-Derivatives-Holders.png
7 Princeton Law Review, Prof. Mark J. Roe, The Derivatives Market's Payment Priorities as Financial Crisis Accelerator: http://www.naic.org/documents/committees_e_receivership_110819_comments_mo_doi.pdf
8 Chris Martenson Peak Prosperity, http://www.peakprosperity.com/video/223/playlist/153/chapter-7-money-creation
(follow link for current DC market share for Morgan Stanley)
4. DC Government Deposits/Investments
(follow link for current DC government deposits with Morgan Stanley)
5. Criminal Activity List
Listed below are some of the recent criminal cases against Morgan Stanley:
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On August 7, 2012, it was announced Morgan Stanley would have to pay $4.8 million in fines in order to settle an electricity price fixing scandal, which has been estimated to have cost New Yorkers $300 million 1 2
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As of October 2012, Morgan Stanley is facing lawsuits and government investigation surrounding the Facebook IPO. It is claimed that Morgan Stanley downgraded their earnings forecasts for the company while conducting the IPO roadshow. 3 4
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On June 5, 2012, Morgan Stanley agreed to pay a $5 million fine for unlawful noncompetitive trades5
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In April 2010, the Commodity Futures Trading Commission announced Morgan Stanley agreed to pay $14 million related to an attempt to hide prohibited trading activity in oil futures 6
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In December 2004, Morgan Stanley paid a $100,000 to National Association Of Securities Dealers and paid $211,510 in restitution to customers for failure to make proper disclosures to municipal bond investors. 7
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In September 2004, Morgan Stanley paid a $19 fine for failure to deliver official documents to customers in registered offerings, inaccurate reporting of certain program trading information, short sale violations, failures to fingerprint new employees and failure to timely file exchange forms 8
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In April 28, 2003, Morgan Stanley was one of ten banks fined for deceiving investors with biased research. Morgan Stanley was fined $125 million 910
1 Huffington Post, http://www.huffingtonpost.com/2012/08/07/morgan-stanley-price-fixing_n_1753637.html?utm_hp_ref=business
2 Department of Justice, http://www.justice.gov/opa/pr/2011/September/11-at-1292.html
3 Reuters, http://www.reuters.com/article/2012/05/22/idUSL1E8GMB9I20120522
4 Huffington Post, http://www.huffingtonpost.com/2012/10/04/facebook-ipo-lawsuits-new-york_n_1941245.html
5 Commodities Futures Trading Commission, http://www.cftc.gov/PressRoom/PressReleases/pr6270-12
6 Commodities Futures Trading Commission, http://www.cftc.gov/PressRoom/PressReleases/pr5816-10
7 Financial Industry Regulatory Authority , http://www.finra.org/Newsroom/NewsReleases/2004/p012707
8 New York Stock Exchange, http://www.nyse.com/press/1095675057023.html
9 CNN, http://money.cnn.com/2003/04/28/news/wallst_settlement/index.htm
10 Securities and Exchange Commission, http://www.sec.gov/news/press/2003-54.htm