It's better than donuts!
There's a great read today in the Wall Street Journal....
On the face of it, Morgan Stanley appears to be suffering more indigestion from its voracious appetite for financing leveraged buyouts than Lehman Brothers. The larger Wall Street firm's third-quarter earnings came in 11% under estimates, while its rival actually beat expectations. What's more, Morgan Stanley took a larger hit from writing down loans and securities. But these numbers are misleading.
For starters, Lehman's overall results benefited from a remarkably low tax rate that was almost a fifth lower than the rolling average of the previous four quarters. Without it, the investment bank would have missed estimates by about five cents -- still less than Morgan Stanley, whose tax rate increased, but a miss nonetheless.
But the real juice stems from how the two accounted for loans to leveraged deals. Both had bulked up after jumping in belatedly. When he returned to Morgan Stanley two years ago, Chief Executive John Mack vowed to expand the firm's stomach for risk. And by the end of the second quarter, the firm's lending commitments to noninvestment-grade companies had jumped more than tenfold to $32 billion. Its leveraged buyout commitments hit $43 billion. Lehman's exposure in the first six months of this year quadrupled to $44 billion. (Read more)