No, JP Morgan Chase bought it. Not the same company. JP Morgan Chase is a deposit bank, Morgan Stanley is a wall street investment bank that specializing in issuing securities for other companies etc.
Also, the Wa Mu failure wiped out $25 billion in bondholders - well the senior bits may get 10 cents on the dollar - and that is a large part of what sparked the sell off in the bonds of other distressed banks. Wachovia debt sold at 130% yields today. National City, 60%. Morgan Stanley, 40%. Several smaller local banks likewise in the critical ward.
Also, technically the sequence of events was - the FDIC declared Wa Mu failed and seized it, then sold all of its assets and *only* its deposit liabilities to JP Morgan, for a $1.9 billion payment into the FDIC's loss reserve fund. The bondholders of Wa Mu were left with the residual cash in the parent holding company - about $2.5 billion in current assets - to cover $25 billion in bondholder liabilities. The Wa Mu shareholders, common and preferred, were wiped out. Junior bondholders will be luck to see a few cents, senior bondholders may get around 20 cents on the dollar.
Every distressed bank's debt therefore traded down to junk bond status, if not in default status, on the failure. Wachovia's debt hit 130% yields and it is in merger talks with Citigroup and Wells Fargo, because it can't survive as an independent institution if if can't raise money at reasonable rates.