Morgan Stanley to China? And other rumors.

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Will a majority stake in Morgan Stanley be sold to China? Brad Setser from the Council of Foriegn Relations weighs in on a report from Reuters about how such a deal between the China Investment Corporation may look.

Reuters is reporting that Morgan Stanley has approached the China Investment Corporation (CIC) for additional capital; it isn?t just talking to Wachovia.

It order to get the equity it needs, the CIC?s stake would need to be quite large. It is also the kind of thing that would have to be approved by China?s State Council. And I would have to say that the CIC has yet to demonstrate a track record of apolitical, transparent management of its external assets ? in part because it hasn?t been around for very long and in part because it hasn?t been very transparent.

We have already given up the Chrysler building, a large chunk of Citi and several other notable institutions; so why not Morgan Stanley? At this rate we’ll wake up tomorrow with a large portion of our country’s largest firms held outside of the US and then complain that jobs are being shipped overseas. The fact that these companies will have assets on US soil will mean nothing in regards to their management and ownership – something we’ll be forced to swallow in the years to come as a result of this mess.

Barry at The Big Picture also has a Morgan Stanley/CIC tie-up on his radar along with an intriguing possibility of a Goldman Sachs/HSBC match.

We’ll keep you posted until we get on a plane to BlogWorld after lunch.