Shares of Goldman Sachs and Morgan Stanley plunged today, a sign that investors fear they can't survive in their present form as the last...

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NEW YORK — Shares of Goldman Sachs and Morgan Stanley plunged today, a sign that investors fear they can’t survive in their present form as the last two major independent investment banks.

Executives of both companies insisted a day earlier, when they were reporting profits for the most recent quarter, that they do have the financial wherewithal to go it alone.

But analysts said the question increasingly is whether continued market turmoil could force them to acquire or be acquired by commercial banks, whose deposit-taking operation would provide a stable source of funding.

Morgan Stanley shares fell $7.56, or 26.3 percent, to close at $21.18. Goldman shares fell $23.01, or 17.3 percent, to $110.

Anxious investors also continued to bid up the price of protecting against a default of debt issued by the two investment banks. The spike in credit default swaps has fanned fear gripping Wall Street that the investment banking model is in jeopardy of extinction.

“This may be the most panicky the market has been in since this credit crisis began,” said Roy Smith, a professor of finance at New York University’s Stern School of Business. “People are running for high ground at any cost. The question is, can they stay solvent longer than the market is irrational.”

Smith believes the companies can survive on their own, but remains concerned about the current environment in which they operate. Global banks and brokerages have written down more than $350 billion from wrong-way bets on mortgage investments and other risky securities during the past year.

The upheaval in the U.S. financial system has driven Merrill Lynch and Bear Stearns into emergency sales, and Lehman Brothers into bankruptcy.

Morgan Stanley had hoped to stem investor panic about its financial health by releasing third-quarter results a day earlier than planned. On Tuesday, the company posted a better-than-expected profit, and while Goldman Sachs’ profit slumped 70 percent, it did finish the quarter in the black.

Goldman Sachs Chief Financial Officer David Viniar and Morgan Stanley CFO Colm Kelleher both said their firms were able to navigate through the market dislocation, and vowed to remain independent. The CFOs said their firms have enough cash on hand and no need to raise more.

Spokesmen for both investment banks declined to comment today about the plunge in their shares.

Analysts such as Fox-Pitt Kelton’s David Trone have told clients that the sale of Merrill Lynch and collapse of Lehman Brothers might force the remaining investment banks to pursue some kind of transaction to stabilize results.

The steady funding base of deposits held by banks would go a long way in assuaging investors concerned about volatility.

There have been numerous reports in the past year that Goldman could buy a retail bank, with Charlotte, N.C.-based Wachovia mentioned the most. The investment bank has advised Wachovia in the past, and a deal would help the bank keep in step with rival Bank of America after it agreed to acquire Merrill Lynch.