You should read the fascinating WSJ article on Morgan Stanley that details what what happened days after Lehman Brothers collapsed. It explores the massive piling on on all fronts that caused the almost fatal death spiral in its stock.
It details who was trading the firm's CDS - including JP Morgan, Merrill Lynch, UBS and Deutsche Bank on the banking side, and King Street Capital, Owl Street Capital on the hedge fund side. There were those who were shorting the stock -- including Dan Loeb's Third Point LLC and Millennium Partners. There were those making pitches to hedge funds, to steal prime broker business away, including JP Morgan (which drew a rebuke from John Mack to Jamie Dimon), Deutsche Bank, Credit Suisse and UBS. There were those who were bailing on Morgan's prime brokerage business -- including Millenium Partners, Third Point, Owl Creek. And there was the breakdown in the 20 year relationship between famed short seller Jim Chanos after John Mack groused to the SEC and employees, blaming the shorts (many of them MS clients) for attacking his stock. Chanos pulled over $1 billion out of Morgan....
"It's one thing to complain, but another to put out a memo blaming your clients," says Mr. Chanos, who adds that the development all but ended a more-than-20-year relationship with Morgan Stanley. He says his fund hadn't bought any Morgan Stanley swaps or sold short its stock....
A month after the mayhem, Mr. Mack said in an interview that he had all but given up trying to get to the bottom of what was driving the trading in his firm's securities during those chaotic days in mid-September. "It's difficult to say what's rumor and what's fact," he said.
Anatomy of the Morgan Stanley Panic - Wall Street Journal
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