Morgan Stanley, WaMu Edge Closer to Deals

Two of the biggest financial institutions in the midst of the market turmoil are moving closer to hammering out deals. Washington Mutual's suitors are believed to include Citibank, JP Morgan and Bank of America, insiders tell Bloomberg, while Morgan Stanley and Wachovia have stepped up merger talks, reports the New York Times. Morgan is also in separate talks with the China Investment Corporation.

Washington Mutual and Wachovia's huge exposure to toxic debt is likely to prove a stumbling block for any deals. Morgan Stanley is considering splitting Wachovia into a "good bank" and a "bad bank" and merging with the good one. Those eyeing WaMu's 2,300 branches and $143 billion in deposits are turned off by mortgage investments likely to lose almost $20 billion in the next couple of years.
(More Morgan Stanley stories.)