Morgan Stanley and Goldman shares tumble

By Christian Plumb and Joseph A. Giannone

NEW YORK (Reuters) - Morgan Stanley and Goldman Sachs shares slumped on Friday after Moody's Investors Service said it may cut their ratings, reviving concerns about the viability of their banking models.

Stock of Morgan Stanley, the No. 2 independent investment bank after Goldman, fell 43 percent on doubts that a planned $9 billion (5.2 billion pound)cash injection from Mitsubishi UFJ Financial Group (MUFG) would be enough to enable the company to ride out the current crisis.

Morgan Stanley shares have lost about 70 percent in the past week and are now at their lowest level in nearly 14 years on worries that Mitsubishi UFJ may back out of a deal to inject much-needed capital. Both companies have given assurances that the deal was expected to close on Tuesday.

Goldman Sachs Group Inc shares were down 20 percent on worries about Morgan and the broader financial turmoil. The Amex Securities Broker-Dealer Index shed 10 percent.

"Morgan Stanley shares have been under extraordinary pressure as of late, for no apparent fundamental reason, as we estimate liquidity, the balance sheet, and long-term earnings prospects are sound," David Trone, an analyst with Fox-Pitt Kelton Cochran Caronia Waller, said in a research note.

BANK HOLIDAY

"However, as we've seen with Bear Stearns and Lehman, once the fear virus has infected the story, it is tough to shake."

Morgan Stanley declined to comment on the movement in its stock and debt, or comment on speculation about the MUFG deal.