Morgan, Wachovia Get Pre-Emptive

Citing "advanced merger talks" between still-standing U.S. investment bank Morgan Stanley (MS) and retail and corporate banker Wachovia (WB), CNBC reports that talks are ongoing, but due diligence is still a ways off.  Apparently, the market feels a proposed deal better suits WB -- up $1.47 to $10.59 so far today -- than Morgan -- down $1.75 to around $20.

Morgan Stanley has felt the strong downward pull of the week's extraordinary events, even though the company recently posted a 55% positive earnings surprise in its August quarter. By comparison, Wachovia hasn't seen a positive surprise in any of its last 4 quarters.

Probably there are reasons on both sides why a merger like this might be attractive at this time.  No, men in business suits aren't falling from Wall Street high rises these days, but that rumbling sound has continued all week to reverberate throughout lower Manhattan.  If joining forces is the best way to survive the storm, I'm sure the Fed -- not to mention the U.S. taxpayer -- will be grateful these two companies made the effort.

Read the full analyst report on MS

Read the full analyst report on WB