The firm has been investigating the matter since May, but has yet to officially decide whether the 'mismark' was an error, or worse............Having said this, Morgan Stanley CFO Colm Kelleher appears to have his own view. Speaking in a conference call with analysts Wednesday, MarketWatch quotes Kelleher saying: 'We are very angry about it, but in this sort of environment of stressed markets, one would expect to see people behave improperly'. Reuters has Kelleher saying: 'I'm sure we know what the sentence is going to be, but I don't want to be like the Queen of Hearts' (who famously said, of course: 'Off with his head!').

Although Morgan Stanley has not identified the trader, The Evening Standard alleges it is a certain Matthew Piper, a Brit thought to be in his late-30s.

Bloomberg reports that John Paulson, the man who made $3.7bn last year shorting subprime, has said that he feels that the credit crisis is far from over.

Speaking at a hedge fund conference in Monaco earlier this week, Paulson said: 'I don't think we're through the credit crisis. There are lots of problems out there, and I think we'll continue to experience problems for the remainder of the year......I believe we're going into recession. I think the second half (of the year) will be worse than the first....I don't consider myself a bull or a bear. I'm a realist'.

Reuters reports that analysts at Goldman are predicting that the credit crisis will not peak until 2009, and that US banks may need to raise an additional $65bn in capital. The Goldman crew wrote: 'Capital raising becomes harder. Only 4 out of 42 deals we track are in-the-money so far. This will make the next round of deals harder and more expensive'.

And talking of capital raising, Reuters reports that Switzerland's central bank is demanding that both UBS and Credit Suisse build up a bigger capital base to 'save a repeat of the subprime mortgage disaster that spoiled the country's reputation as an unshakeable powerhouse'. And Bloomberg reports that JPMorgan analysts have estimated that investors withdrew around $39.3bn from UBS's wealth management units in the second quarter, following the company's subprime lending-related woes. It also emerged Wednesday that activist investor Olivant Advisers now holds some 2.5% of UBS's ordinary share capital.

Finally, The Daily Telegraph reports that, according to Royal Bank of Scotland credit-strategist Bob Janjuah, the next 3 months are going to be really tough, as credit markets tighten and inflation goes on the march. Janjuah said: 'A very nasty period is soon to be upon us - be prepared........I do not think I can be much blunter. If you have to be in credit, focus on quality, short durations, non-cyclical defensive names'.

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