Both Morgan Stanley and Goldman shares look reasonably priced, with Morgan Stanley now trading below its book value of $31 and Goldman at 1.3 times book value. It's tough to peg earnings for both companies given the volatile markets. But if they earn a 15% return on equity, Morgan Stanley would net about $4.50 a share and Goldman, $15 a share. That suggests Morgan Stanley trades for six times normalized earnings and Goldman, 8.5 times earnings, although an assumption of a 15% ROE could be optimistic in the current environment. "The independent investment banks -- Morgan Stanley and Goldman Sachs -- can survive and they must survive," says Byron Wien, chief investment strategist at Pequot Capital Management in New York and a former Morgan Stanley strategist. "Their survival is critical to New York as a financial center and to the health of the entire financial system. The culture of an investment bank is different from that of a commercial bank. I want to see the investment-bank culture preserved."

Both Morgan Stanley and Goldman shares look reasonably priced, with Morgan Stanley now trading below its book value of $31 and Goldman at 1.3 times book value. It's tough to peg earnings for both companies given the volatile markets. But if they earn a 15% return on equity, Morgan Stanley would net about $4.50 a share and Goldman, $15 a share. That suggests Morgan Stanley trades for six times normalized earnings and Goldman, 8.5 times earnings, although an assumption of a 15% ROE could be optimistic in the current environment. "The independent investment banks -- Morgan Stanley and Goldman Sachs -- can survive and they must survive," says Byron Wien, chief investment strategist at Pequot Capital Management in New York and a former Morgan Stanley strategist. "Their survival is critical to New York as a financial center and to the health of the entire financial system. The culture of an investment bank is different from that of a commercial bank. I want to see the investment-bank culture preserved."

IT WOULD BE WISE, at this juncture, to avoid chasing the shares of leading regional banks, several of which hit new 52-week highs on the opening Friday. Richly priced regionals include Wells Fargo (WFC), US Bancorp (USB) and PNC Financial (PNC).

Wells Fargo, for instance, trades at 39.80, double its July low. It commands 19 times projected 2008 profits of $2.12 a share, 17 times estimated 2009 profits and nearly four times tangible book value.

US Bancorp (USB), at 38, commands 17 times projected 2008 profits of $2.24 a share, 15 times estimated 2009 profits and six times tangible book.

The market was buzzing Friday with talk that many regional banks will take advantage of the lift in their stock prices to raise new capital in the next two weeks. With the market for preferred shares in shambles, banks probably will have to raise common equity. Potential candidates for equity issuance include Bank of America, BB&T (BBT) and Zions Bancorp (ZION).

The market was buzzing Friday with talk that many regional banks will take advantage of the lift in their stock prices to raise new capital in the next two weeks. With the market for preferred shares in shambles, banks probably will have to raise common equity. Potential candidates for equity issuance include Bank of America, BB&T (BBT) and Zions Bancorp (ZION).

The market was buzzing Friday with talk that many regional banks will take advantage of the lift in their stock prices to raise new capital in the next two weeks. With the market for preferred shares in shambles, banks probably will have to raise common equity. Potential candidates for equity issuance include Bank of America, BB&T (BBT) and Zions Bancorp (ZION).