With the collapse of Lehman Brothers and  Bank of America picking up Merrill Lynch, the seismic readings from the financial earthquake at Wall Street seem to be increasing rather than abating. 

Now, with the American International Group being the latest entity to be bailed out by $85 billion government loan, other banks who find themselves next on the list to being hit have started looking at merger options to find some kind of safe harbour from the financial storm that is raging at Wall Street.

According to reports, Washington Mutual (WaMu) has put itself up for sale, and has asked investment banking firm Goldman Sachs to advise it. 

Possible buyers for WaMu are being reported as JPMorgan Chase, HSBC, Citi, and Wells Fargo, even though there have been reports that JP Morgan Chase is abstaining from the WaMu deal.
 
WaMu has said that its largest shareholder, priave equity firm TPG Capital, has accorded the bank permission to raise money, or sell itself without compensating TPG. TGP had invested $7 billion in the WaMu in April.

In a statement, TPG Capital said, "It became clear that it would be in the best interests of Washington Mutual and our investors to waive the price reset payment provisions that were agreed to with the bank at the time of our original investment in April 2008, Our goal is to maximize the bank's flexibility in this difficult market environment."

Reports also indicate that a fellow Fortune 500 bank, Wachovia, is also looking at merger options with Morgan Stanley, whose share price has been shredded by Wall Street's financial storm, even though it posted better-than-expected earnings.

Morgan Stanley is one of the last two stand-alone investment banks left standing on Wall Street. For its part, Wachovia has also taken its share of punches from the mortgage meltdown, having reported losses to the tune of $9 billion during the second quarter, and reducing its dividend by 87 per cent.

Those losses caused Wachovia to find a replacement for its CEO Ken Thompson, who was replaced by  former Treasury undersecretary Robert Steel.

However, industry insiders point out that though this flurry of activity could be the first signs oif the financial services industry testing the waters, not every merger report would be true. Some reports, are merely rumours floated by bankers to gauge the market's reaction to certain events, situations, or ideas, which makes it rather impossible to distinguish between facts and rumours for some time to come.

Morgan Stanley is now reported to be seeking shelter with Wachovia and /or other suitors after its seventh straight decline in share price has its stock value hovering at the lowest level since 1998. Morgan Stanley's shares were down $6.95, around 24 per cent to $21.75.  Goldman Sachs too fell $18.51, around 14 per cent, to $114.50.

 What is hurting the investment bank's shares is the widespread perception that they cannot rely on over-strung global markets to replenish their cash reserves to fund trading and lending businesses.

That perception has pushed up their borrowing costs, and has the potential to ultimately make those funding options so prohibitively expensive that they would not be able to fund their businesses any longer.

Wachovia's troubles are a huge stockpile of adjustable-rate mortgages that it bought along with the Golden West Financial Corp. in 2006. Thereafter, Wachovia's financial condition has progressively worsened, and its stock price has plunged.