Morgan Stanley is considering a merger with a bank to revive investor confidence after its shares sank 42 percent this week following the collapse of Lehman Brothers Holdings Inc.

John Mack, Morgan Stanley's chief executive officer, got a call from Wachovia Corp on Wednesday indicating interest, said a person with knowledge of the matter, declining to be identified because the talks aren't public and may end without an agreement. The New York-based firm is also seeking ways to limit short sales of its stock, the person said.

Morgan Stanley and Goldman Sachs Group Inc tumbled the most ever on Wednesday as the deepening credit crunch fueled concerns about their ability to fund themselves without the access to deposits that banks have. A deal involving Morgan Stanley would leave Goldman Sachs as the only independent Wall Street investment bank, after Merrill Lynch & Co sold itself to Bank of America Corp to avoid the fate of bankrupt Lehman.