Who was Hank Paulson talking about?

WSJ blog:

Earlier Deal Journal mulled over a line in a new report by the TARP watch dog stating that Former Treasury Secretary Hank Paulson’s was worried that one of the nine financial institutions that received the first round of government bail out funds was in danger of collapse last fall.

Narrowing that list even further, the report says that the bank that worried Paulson has already paid back its initial TARP funds.

Who could it be?

There are five TARP recipients that have paid back the government’s initial capital injection: J.P. Morgan Chase, Goldman Sachs Group, Morgan Stanley, Bank of New York Mellon and State Street.

J.P. Morgan was the government’s go-to bank for saving troubled firms, first Bear Stearns and then Washington Mutual, and it is widely believed to have been strong enough then to weather the storm.

State Street and Bank of New York Mellon took big write downs in 2008. And like many financial names, State Street’s stock had fallen 64% in October 2008 from a year earlier. But nothing facing these banks was considered life threatening.

That leaves Goldman Sachs and Morgan Stanley. Lacking deposits, the market worried about Goldman and Morgan’s ability to lend and borrow money from other banks because the value of the assets being held on their books had deteriorated so markedly. But it was widely perceived that Morgan Stanley’s woes were more acute.

Following Lehman’s bankruptcy last September, Morgan Stanley’s stock fell 83% in a month. Bond traders bet that Morgan Stanley wouldn’t survive; some regulators wanted the company sold to J.P. Morgan to save it. Adding to Morgan Stanley’s problems was the feeding -frenzy by short sellers, who were betting that company’s stock would continue to fall. At one point, Morgan Stanley chief John Mack confided to his wife that he wasn’t sure the company would make it.