Morgan Stanley (NYSE:MS) waited too long to take new money. If should have gotten the capital long ago the way Goldman Sachs (NYSE:GS) did with Warren Buffett.

But, John Mack, the MS CEO, thought he might go it alone or get better terms, By waiting, he damaged his shareholders more than he could imagine. And, it may get worse.

The good news is that, according to The New York Times, the $9 billion coming from Mitsubishi UFJ will be protected by the federal government. That means the deal is likely to close.

The very bad news is that, according to the FT, "Under the new terms being discussed, the entire $9bn would be in the form of convertible preferred stock, that would eventually convert into common stock at a price that is expected to be between $20 and $25." Under the old terms, the conversion was at above $35.

The latest formula means that current shareholders face more dilution.

At the end of the day, the news has to be viewed in some positive light. MS will survive. But, the cost was awful. On September 8, Morgan traded at $43. No one can imagine that Mack did not know he had trouble then. It was only four weeks ago. He should have done a quick deal while he had the chance. By waiting, he let market fear, and probably some short selling, take his shares below $10.

Mack allowed Morgan to get into the trouble in the first place. He has been in upper level Wall St management for 30 years. He arrogance made him believe that he could get tremendous terms in bringing in new capital.

He was wrong on that account. But, his compensation will probably be fabulous next year.

Douglas A. McIntyre is an editor at 247wallst.com.