Morgan Stanley plunges 25%, Goldman 10%; other financials stable

Morgan Stanley (NYSE: MS) shares had plunged by about 25% about an hour ago, while Goldman Sachs (NYSE: GS) shares had dropped about 11%. By now, the declines have moderated with MS down "only" 15% and GS down about 8%.

Other financials, such as Bank of America (NYSE: BAC), Wells Fargo (NYSE: WFC) and Citigroup (NYSE: C) aren't displaying such declines. BAC is down less than 2%, WFC up 0.75% and C is up half a percent.

With no news on either company, it isn't clear why the two investment banks, recently turned commercial banks, are plunging.

CNBC's David Faber said one of the reasons Goldman could be down today is a "rumor the firm was involved with the 'Short Volkswagen' trade, which has blown up on a massive short squeeze." Volkswagen (OTC: VLKAY) briefly took over the lead from Exxon Mobil (NYSE: XOM) as the largest market cap firm in the world after the recent spike in share price.

While this may explain Goldman's stock price decline, it doesn't Morgan's, which has been in the news regarding the settlement of Visa (NYSE: V) and MasterCard (NYSE: MA) with Discover (NYSE: DFS). Morgan claims it deserves a piece of the settlement.

Still, this news can't have caused the stock to plunge. Something else might be in the works.

Update 12:45 pm: Seems the speculation regarding being on the wrong side of a Volkswagen trade applies to Morgan Stanley too. While Morgan's spokesperson denied any exposure to VW, Goldman declined to comment. Societe Generale, the French bank, saw its shares also hit on a similar speculation regarding a bad bet on VW shares.