Jesse Eisinger writes: Morgan Stanley by any measure is a safe and solid investment bank. Except for one: The amount of trust people have in the whole financial and political system. It’s just about zero.
That’s why the bank’s shares are down 42 percent this year. That’s why all the big bank stocks have double-digit dips.
True, they start their next round of quarterly reporting in a matter of days. Morgan Stanley is scheduled to report its third-quarter earnings on Oct. 19, and its earnings may calm fears temporarily.
But the essential problem will still be there, a slow burn beneath the global financial system that flares up at the worst moments. Banks don’t have faith in other banks, investors are deeply scarred and wary, and nobody believes that the governments around the world could grapple with the magnitude of the problems, even if they wanted to.
Three months ago, the Belgian bank Dexia passed the European stress tests. By that measure, it was fine. Then it collapsed.