Goldman Sachs and Morgan Stanley have been approved by the Federal Reserve to be transformed from investment banks to more regulated traditional banks. This will get them access to more Federal credit.
The Wall Street Journal reports that Goldman Sachs and Morgan Stanley have been approved by the Federal Reserve to be transformed
"from investment banks to traditional bank holding companies a step that would place the last two Wall Street titans under the close supervision of national bank regulators, subjecting them to new capital requirements and additional oversight."
"The steps effectively mark the end of Wall Street as it has been known for decades..."
The Federal Reserve Board on Sunday approved, pending a statutory five-day antitrust waiting period, the applications of Goldman Sachs and Morgan Stanley to become bank holding companies.
To provide increased liquidity support to these firms as they transition to managing their funding within a bank holding company structure, the Federal Reserve Board authorized the Federal Reserve Bank of New York to extend credit to the U.S. broker-dealer subsidiaries of Goldman Sachs and Morgan Stanley against all types of collateral that may be pledged at the Federal Reserve's primary credit facility for depository institutions or at the existing Primary Dealer Credit Facility (PDCF); the Federal Reserve has also made these collateral arrangements available to the broker-dealer subsidiary of Merrill Lynch. In addition, the Board also authorized the Federal Reserve Bank of New York to extend credit to the London-based broker-dealer subsidiaries of Goldman Sachs, Morgan Stanley, and Merrill Lynch against collateral that would be eligible to be pledged at the PDCF.
The two companies requested the permission to make this transformation, with the belief it would give them more flexibility and options.
CNN reports, ""This new bank holding structure will ensure that Morgan Stanley is in the strongest possible position," said John Mack, chairman and CEO. "It also offers the marketplace certainty about the strength of our financial position and our access to funding."
