September 22, 2008, 8:23am
WASHINGTON - The Federal Reserve said Sunday it had granted a request by the country’s last two major investment banks — Goldman Sachs and Morgan Stanley — to change their status to bank holding companies.
The Fed announced that it had approved the request of the two investment banks. The change in status will allow them to create commercial banks that will be able to take deposits, bolstering the resources of both institutions.
The change continued the biggest restructuring on Wall Street since the Great Depression.
The request for the change to bank holding companies was granted by a unanimous vote of the Fed’s board of governors during a late Sunday meeting in Washington.
The change of status means both companies will come under the direct regulation of the Federal Reserve, which regulates the nation’s bank holding companies. The banking subsidiaries of the two institutions will face the stricter regulations that commercial banks are required to meet. Previously, the primary regulator for Goldman and Morgan Stanley was the Securities and Exchange Commission.
So who exactly is going to start putting their hard earned cash on deposit with these guys?
I believe it’s to enable them to take over the retail operations of some of the banks that are going to go bust sometime soon (think WaMu and Wachovia). Whether the toxic stuff is deposited in Hank’s TARP (sound disgusting, doesn’t it?) first is another question. I would image the answer is yes for Goldman, anyway, as they seem to have a good line in providing treasury secretaries.