Smith Barney and Morgan Stanley logos.
Smith Barney and Morgan Stanley logos. - 
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TESS VIGELAND: The financial world is abuzz today at the prospect of a multibillion-dollar deal between two Wall Street giants. Citigroup is expected to announce a merger of its famous Smith Barney brokerage with Morgan Stanley. The deal could garner $2 [billion] to $3 billion for Citi. And with its stock down 17 percent just today, the bank could certainly use the cash.

But what's Morgan Stanley getting out of the deal? And where's it getting the money to buy Smith Barney? From taxpayers? Marketplace's Sarah Gardner reports.

SARAH GARDNER: The first thing former SEC counsel Mercer Bullard thought when he heard news of the buyout? The $10 billion Morgan just received in the bailout.

MERCER BULLARD: I think the idea of the $10 billion was to solve liquidity problems. And one certainly wouldn't think the liquidity problem was the inability to raise enough cash to buy a brokerage.

But some analysts say Morgan Stanley is using its bailout money wisely. It could end up with the biggest retail brokerage in the world. There's a risk, though.

As a Wall Street Journal blogger put it: "What if the bear market persists? Morgan could be stuck with 20,000 retail brokers sitting around watching CNBC all day." But banking analyst Nancy Bush says in these touch-and-go times, sitting on your hands is risky, too.

NANCY BUSH: And actually the timing is probably, in an ironic sense, good. Because you don't want to try to buy into these businesses when things are great. You want to buy into them when the outlook is uncertain and, you know, you can get them on the cheap.

This deal could inspire even more consolidation in the U.S. banking business. But customers at Smith Barney and Morgan Stanley probably won't notice a thing. NYU Finance Professor Ingo Walter:

INGO WALTER: I think the customers have no cause for concern. They can continue to deal with their own broker. They're dealing with a first-rate firm.

Walter has been a Smith Barney customer since the 70's. Since then, he says, the brokerage has had 12 different names.

I'm Sarah Gardner for Marketplace.