WRAPUP 7-US banks raise capital;Europe peers' bad debts soar

* U.S. banks race to fill $75 bln capital need

* Morgan Stanley, Wells Fargo sell shares at discount

* Financial stocks soar 12 pct on hope the worst is past

* Morgan Stanley, B of A sell non-guaranteed debt

* RBS Q1 bad debts quadruple to 2.9 bln stg (New throughout, adds comment, updates share prices)

By Elinor Comlay and Dan Wilchins

NEW YORK, May 8 (Reuters) - Morgan Stanley and Wells Fargo sold more than $15 billion of shares and bonds, as the two companies rushed to the head of the line of banks looking to raise funds following government stress tests.

Bank of America Corp (BAC.N) got in line too, saying it plans to sell 1.25 billion shares to help meet what the government deemed a $33.9 billion capital shortfall for the lender. Banks are hoping to sell shares fast, in case the soaring stock market starts to retreat, analysts said.

"If I were running a bank, I would sell stock now, too. It's a great time to ride the wave," said Joshua Siegel, managing principal at StoneCastle Partners, which owns Bank of America and JPMorgan Chase & Co (JPM.N) shares.