Will the Legends of the Street Fall?

Today, after AIG was rescued from certain demise by the U.S. government, financial stocks again took it on the chin, as investors took little comfort in the Fed’s coming to the rescue of the American insurance giant. Included in those financial firms that endured several hooks and jabs were the top two independent investment banks still standing: perennial league table leader Goldman Sachs and perennial runner-up Morgan Stanley. Both firms’ shares took nosedives today, with Morgan Stanley’s shares falling about 24 percent and Goldman’s slipping 19 percent (at one point, Morgan’s shares were down an astounding 44 percent and Goldman’s were in the hole by as much as 26 percent).

Many have predicted that on the heels of Lehman Brothers’ and Merrill Lynch’s inability to remain independent, Morgan will be the next investment bank to take cover under the umbrella of commercial deposits. Already, <>Wachovia has surfaced as one possible Morgan Stanley suitor; no doubt others will rise to the fore in the next 24 hours. And if Morgan goes, that would mean the golden boy of Wall Street might not be too far behind.

It's hard to believe, but it's now likely that both Goldman and Morgan are looking at their last few days as independent entities.

As always, we welcome your thoughts, comments, predictions, rants and advice below.