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Worried Investors Focus on US Banks


Despite efforts to stabilize shaky financial markets with a huge influx of cash, nervous investors are still worried that some large banks might fail.

Much of the focus is on Goldman Sachs and Morgan Stanley, two large, independent U.S. investment banks that have so far managed to survive the housing and credit crisis.

Shares of both banks have plummeted this week, and some economists say mounting loses could soon make it impossible for the two banks to raise enough cash to stay in business.

Officials at Goldman Sachs and Morgan Stanley have been trying to answer those concerns by exploring possible mergers or by selling stakes to other banks in the U.S. and around the world.

So far, the efforts have not reassured investors, who are selling large quantities of the stock, making it even harder for the companies to raise cash.

Two of the biggest U.S. investment banks, Bear Stearns and Merrill Lynch, have already been forced to sell themselves to other banks, while a third, Lehman Brothers, filed for bankruptcy.

Investors are also concerned about the fate of one of the biggest U.S. savings and loan banks, Washington Mutual. It has been hit hard by the housing and mortgage crisis and news reports say it has put itself up for sale.

Meanwhile, London-based Lloyds TSB reached a deal to buy Halifax Bank of Scotland (HBOS) for nearly $22 billion. Shares of HBOS have plummeted in recent days.

Also Thursday, Dow Jones and Company said it would remove insurance giant American International Group from the Dow Jones Industrial Average as of Monday.

AIG agreed to an $85 billion U.S. government bailout this week. Dow Jones officials say they are making the change because AIG is now effectively controlled by the U.S. government, and because of its low stock price.

The 112-year-old stock index is considered a prime indicator of the U.S. economy.

Some information for this report was provided by AP and Reuters.

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