The federal government's $10 billion equity investments in both Morgan Stanley ( MS) and Goldman Sachs ( GS) seem to have eased nagging doubts about the firms' liquidity positions, but the long-term outlook for both businesses remains far from clear.

The investments in Morgan Stanley and Goldman Sachs are part of a $250 billion capital injection unveiled by the government Tuesday to bolster the U.S. banking system.

Combined with Mitsubishi UFJ Financial Group's ( MUFG) $9 billion investment in Morgan Stanley and Berkshire Hathaway's ( BRK-A) $5 billion investment and concurrent $5 billion public equity offering by Goldman, the government's backing adds to already strong capital bases for the two companies.

The Federal Reserve considers a bank with a 6% Tier-1 capital ratio well-capitalized. Before the government's investment, Morgan Stanley boasted a Tier-1 capital ratio of more than 15.5% on a pro-forma basis as of Aug. 31. Goldman Sachs said in its third-quarter financial report that it ended the period with an 11.6% Tier-1 ratio.

Even as the major indices hovered in neutral territory, shares of Morgan Stanley were up 20.8% $21.86 Tuesday afternoon, while Goldman stock was up 11.7% to $124.02. The cost of insuring $10 million of Morgan Stanley's debt dropped from more than $1 million on Monday to $375,000 -- a level approaching some semblance of normalcy. Insurance on $10 million of Goldman's debt -- the price of which has been far more stable -- cost $210,000 mid-Tuesday morning.

Morgan Stanley spokesman Mark Lake notes that the company's bonds also have risen from 62 cents on the dollar Monday into the high 80s Tuesday afternoon. He said he expects they are headed higher because it takes time for the market to process all of the information the government released Tuesday.

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