Mitsubishi UFJ Loses $500 Million on Morgan Stanley Stake

Boy, there have been bigger bad investments (TPG putting $7 billion into WaMu comes to mind) but seldom has one come cropper as quickly as Mitsubishi UFJ’s $9 billion interest in Morgan Stanley. The bank took a cool $500 million one-day loss.

From Bloomberg:

Mitsubishi UFJ Financial Group Inc. took a $506 million paper loss on its $9 billion investment in Morgan Stanley yesterday after the rejection of the U.S. financial rescue plan sent banking stocks tumbling.

As part of the deal, the Tokyo-based lender agreed to buy $3 billion of Morgan Stanley’s common stock for $25.25 a share. The second-largest U.S. securities firm plummeted 15 percent in New York Stock Exchange composite trading to close at $20.99.

The loss underscores the risks involved for Asian companies seeking bargains in the wreckage on Wall Street. Morgan Stanley, Citigroup Inc. and Merrill Lynch & Co. have tapped the region’s banks and sovereign wealth funds for money in the past year as falling U.S. home prices triggered the worst financial crisis since the Great Depression.

“It’s increasingly difficult to know what’s going to happen,” said Naoteru Teraoka, who helps oversee $21 billion at Chuo Mitsui Asset Management Co. in Tokyo. “The U.S. bailout plan was the big change we hadn’t had before, but that’s gone now, so things can only get worse.”

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  1. doc holiday

    My motto, is that when there is blood in the streets, stay inside under cover and wait for the blood in the gutters to dry. I think there will be great generational opportunities to invest fairly soon, but these guys kinda jumped the gun a bit by a few weeks — and yah gotta hope they did full DD and were given honest valuations! That deal also should have waited for this qtr to close IMHO, but then again, I don’t make the big bucks…

    FYI: In addition to further strengthening the Firm’s capital position, this alliance would benefit Morgan Stanley and MUFG by providing each with a valuable strategic partner as it seeks to enhance its global footprint and capture financial services opportunities around the world. Morgan Stanley was granted approval yesterday by the U.S. Federal Reserve Board of Governors to become a Federal Bank Holding Company.

    John J. Mack, Morgan Stanley’s Chairman and Chief Executive Officer, said, “This strategic alliance with Mitsubishi UFJ can put Morgan Stanley in an even stronger position as we look to realize the opportunities we see in the rapidly changing financial marketplace

  2. doc holiday

    Perhaps Mitsubishi UFJ Financial Group should be allowed to use the same methodology as Paulson "wanted" to use for The (recently defeated) Bailout Plan, in regard to the valuation of toxic, worthless junk — which was created out of thin air by crooks (who rely on SIFMA & FASB accounting Hocus Pocus)!

    See: § 502(5)(E)(E) In estimating net present values, the discount rate shall be the average interest rate on marketable Treasury securities of similar maturity to the cash flows of the direct loan or loan guarantee for which the estimate is being made.

    See Also: In international law, odious debt is a legal theory which holds that debt incurred by a regime for purposes that do not serve the interest of the nation should not be enforceable. Such debts are thus considered by this doctrine to be personal debts of the regime that incurred them and not debts of the state. In some respects, the concept is analogous to the invalidity of contracts signed under coercion.

    See Also: Force majeure (French for "greater force") is a common clause in contracts which essentially frees both parties from liability or obligation when an extraordinary event or circumstance beyond the control of the parties, such as war, strike, riot, crime, act of God (e.g., flooding, earthquake, volcano), prevents one or both parties from fulfilling their obligations under the contract. However, force majeure is not intended to excuse negligence or other malfeasance of a party, as where non-performance is caused by the usual and natural consequences of external forces (e.g., predicted rain stops an outdoor event), or where the intervening circumstances are specifically contemplated.

    Screw you Hank!

  3. Richard Kline

    I would flatly tell foreign major investors, public and private, do NOT invest in US financials until and unless they have had their books examined by public auditors, been declared solvent with the straightforward numbers available for the due diligence of serious parties of interest, and the government as an active third party. I hope and anticipate that we will have overseas involvement in recapitalizing the US banking system, but first we _must_ get the insolvent firms out of the credit pool, something with regard to which the public authorities here have made no substantive effort, most certainly including the odious Paulson Proposal which would have kept insolvent firms rotting on indefinitely.

  4. a

    I’m not usually a fan of these guys, but Goldman and Morgan each raised 10 B Usd at precisely the right time – after bailout was proposed but before it was rejected.

    I guess that kind of thing is easier, though, when the Treasury Secretary is in your pocket.

  5. Anonymous

    40,000,000 people without guaranteed access to health care in the “greatest country in the WORLD” and a broken health care system under a corporate system of outsourcing is something.

    and, by the way, If we want a competitive capitalistic system, and I do, imagine a football game without rules, referees, and visible score keeping. In competition, anything allowed is required; therefore, the unstoppability of something that was forsseeable by many: Soros has been warning about a ‘global bubble burst’ for some time, etc.

    How could this ideology of deregulation take hold? It is not too soon to start re regulating right now.

    particularly if the president is going to declare an emergency and shove this thing down our throats.

    Is it too much to hope for that he isn’t looking forward to public unrest (October surprise?), a national emergency and martial law?

  6. Anonymous

    Bloomberg: “U.S. stock futures rose…after lawmakers said they intend to salvage a $700 billion bank-rescue package.”

    I am so sick and tired of this journalistic propaganda reaching for unsupported cause-and-effect occurrences to fulfill its agenda. Our corporate-controlled media will stoop to the most absurd, fear-mongering statements in desperate attempts to manipulate the masses into believing a bank bailout is an unfortunate, necessary evil.

  7. Anonymous

    I’ve seen even worse headlines. Check out this AP title: “Bailout bill defeat could cause painful recession.” Sure, it was the failure to pass one bill (out of many possible other bills) that’s the “cause.” I don’t understand the mechanics of how editors and journalists are encouraged to write such counterfactual articles, but whatever it is, it clearly seems to be working.

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