Shares in two US banking giants have fallen on Thursday as investors continue to worry about the turmoil in the global financial markets.

Shares in Morgan Stanley fell 21%, while Goldman Sachs, the largest remaining independent investment bank declined 13%.

Analysts fear the banks may not be able to stand alone as independent firms.

The world’s biggest central banks earlier pumped billions of dollars into markets to try to calm investor nerves.

Morgan Stanley shares have fallen 38% in the past week amid unprecedented turmoil in the global banking system.

Independence threatened

Morgan Stanley is believed to be seeking a partner to help it survive the financial storm.

Analysts also said rival Goldman Sachs may not be able to remain independent.

Events of the past week have reshaped the financial landscape including the rescue of insurance giant AIG, the collapse of Lehman Brothers and the takeover of Merrill Lynch by Bank of America.

Central banks in the UK, US, Europe, Canada, Switzerland and Japan pumped $180bn into money markets on Thursday.

They hope the co-ordinated move, the fourth such effort since the onset of the credit crisis last year, will keep credit flowing and calm volatile markets.

US President George W Bush expressed concerns about the turmoil in the markets saying his administration was prepared to go beyond the “extraordinary measures” already taken to stabilize them.

News reported by The BBC

Morgan Stanley and JP Morgan Chase have agreed to buy back more than $7bn of securities and pay fines to settle allegations that they misled investors.

The deals were with the New York Attorney General and other regulators.

The Wall Street banks were accused of marketing debt products, called auction-rate securities, as much safer than they were.

Other financial firms are also being investigated for misstating the risk of these investments.

Under the deal with New York Attorney General Andrew Cuomo, Morgan Stanley will buy back about $4.5bn worth of auction-rate securities at face value by 11 December.

JP Morgan Chase has agreed to redeem about $3bn of auction-rate debt it sold to customers, which include retail customers, charities and small-to-medium sized businesses by 12 November.

Its settlement also covers debt sold by Bear Stearns, which it bought earlier this year.

Neither bank admitted or denied wrongdoing.

‘Latest victories’

US authorities are investigating how auction-rate securities were marketed throughout the industry before the $330bn market collapsed in February as trouble in the credit markets due to the US sub-prime crisis spooked investors.

Last week, the New York Attorney and the Securities and Exchange Commission (SEC) reached settlements with Citigroup and Swiss banking giant UBS that required the pair to repurchase in total $26bn of the securities.

“Today’s multi-billion dollar agreements are the latest victories for investors seeking relief from the collapse of the auction rate securities market, which has left a stranglehold on billions of dollars,” said Mr Cuomo.

“The fundamental goal has been to return money into the hands of investors, and that’s what these deals do.”

Repercussions

JP Morgan Chase and Morgan Stanley will also reimburse customers who have sold their auction-rate debt at a loss.

JP Morgan Chase will pay a $25m penalty to New York State and the investor protection group the North American Securities Administrators Association, while Morgan Stanley will pay a fine of $35m.

Separately, New Hampshire securities regulators have sued UBS for misleading the state’s student-loan agency about auction-rate debt and so resulting in less money available to offer students loans.

Student-loan agencies and municipalities were frequent users of auction-rate securities because they were seen as highly liquid investments, almost equivalent to cash but offering a higher return because their rates were reset at weekly or monthly auctions.

News reported by The BBC