Morgan Stanley scrambled today to keep an investment from a major Japanese bank as Wall Street held its breath, the New York Times reports. Japan’s Mitsubishi UFJ Financial Group agreed last month to invest $9 billion, but wants better terms after Morgan's market value plunged last week. The talks are so market-vital that Japan and the Treasury are both involved.
Mitsubishi hopes to keep its 21% stake in Morgan Stanley but wants preferred shares, with a 10% dividend, and a lower conversion price to common stock. Japan is asking Washington to promise that shareholders won't be wiped out if the Treasury moves in. Henry Paulson has hinted that Washington might rescue the bank, a move that billionaire investor George Soros calls necessary.