CNNMoney reports that Morgan Stanley (NYSE: MS) is the latest bank to buy back its worthless Auction Rate Securities (ARS) from individual investors. With that buyback, Morgan Stanley follows in the wake of Citigroup, Inc. (NYSE: C), Merrill Lynch & Co., Inc. (NYSE: MER) and UBS AG (NYSE: UBS).

CNNMoney notes that Morgan Stanley said it would offer to repurchase all ARS "held by individuals, charities and small and medium-sized business with accounts of $10 million or less at the bank." Morgan Stanley will begin to start buying back $4.5 billion worth of ARS on September 30th and will "make its best effort to provide liquidity solutions" for institutional investors by the end of 2009. But New York attorney general Andrew Cuomo is not satisfied with Morgan Stanley's proposal.

Meanwhile, the list of big ARS issuers that have not settled grows shorter. Here are six holdouts (with their 2007 municipal ARS issuance in parentheses):

• JPMorgan Chase (NYSE: JPM) ($5.2 B)
• Goldman Sachs (NYSE: GS) ($4.3 B)
• Bank of America (NYSE: BAC) ($3.7 B)

The media is eagerly waiting to jump into the void created by Merrill Lynch (NYSE: MER)'s succession struggle. And its decision this morning to let CEO Stan O'Neal retire and to appoint Alberto Cribiore as interim non-executive chairman is a good one. I think the board should figure out how Merrill should change its corporate strategy before picking a new leader. And I would recommend that it resist pressure to be forced into picking the leadership team before that new strategy has been hashed out.

If I was in Merrill's boardroom, I would be encouraging a debate about the following questions: Why does Merrill need to change its strategy? Why is it important to pick the new strategy before choosing a new leadership team? Shouldn't the board just hire a new CEO and ask the CEO to figure out the strategy?

Here's where I come down on these questions:

• Merrill needs to change its corporate strategy. Merrill is really three companies -- the successful wealth management part supported by 16,000 brokers and $2 trillion in assets under management, the corporate banking part in which Merrill is a middling player, and the volatile fixed income part that forced Merrill to take an $8.4 billion write down. Merrill should decide which of these will be attractive businesses for its shareholders over the next five years and find a way to sell or close the ones that can't earn their cost of capital.