Bloomberg reports today (Moore, 7 June) that Morgan Stanley (MS) is having a hard time convincing investors that it is a different company than the one that borrowed more than $100 billion from the Federal Reserve to survive in 2008. "Morgan Stanley has the highest Tier 1 common ratio among the five largest U.S. investment banks, topping JPMorgan Chase & Co. (JPM) (JPM), Bank of America Corp. (BAC) (BAC), Citigroup Inc. (C) (C) and Goldman Sachs Group Inc. (GS) (GS) Still, it faces the largest potential downgrade from Moody’s Investors Service, has the highest-priced credit-default swaps and trades at the biggest discount to liquidation value."

The reputation metrics suggest that Morgan Stanley is having a hard time convincing any of its stakeholders that it has been rehabilitated. The reason its marketing efforts are falling on deaf ears may be due to its historical reputational volatility (See chart below). Good today, bad tomorrow. For firms such as Morgan Stanley, the path to reputation restoration includes a third party attestation.

Moody's is not playing along which is not a good sign if you believe there is value to Moody's opinion. Many banks, at least in Denmark, don't. In this setting, many banks have turned to Warren Buffet for an investment - a very expensive transparent and ringing endorsement. An alternative path for Morgan Stanley might be obtaining reputation insurance. If a third party with expertise and a view on what is going on inside Morgan Stanley -- Warren Buffet or a specialty reputation insurer -- is willing to risk significant capital, maybe investors should, too.