Money | 09/22/2008 11:30 am
Morgan Stanley, Goldman Sachs Change Bank Status
In the biggest restructuring on Wall Street since the Great Depression, the country’s last two major investment banks — Goldman Sachs and Morgan Stanley — are changing their status to more traditional bank holding companies.
The change in status will allow them to create commercial banks that will be able to take deposits, bolstering the resources of both institutions. It will put the banks under the regulatory eye of the Federal Reserve, instead of primarily being under the watch of the Securities and Exchange Commission.
CNBC reports that the move won’t result in any change in their investment banking and trading operations.
The Washington Post reports on how the conversion of investment banks into the kind of banking companies that once were their rivals will have profound and long-lasting implications for the economy.
The survival tactic comes as Wall Street braced for a week of political wrangling over a proposed $700 billion government bailout for troubled banks.
Morgan Stanley also struck a deal with Japan’s largest bank, Mitsubishi UFJ Financial Group, which agreed to buy up to a 20 percent stake, sending Morgan Stanley shares up 12 percent in pre-market trading.
In other financial news today:
-Stock index futures fell on Monday as investors awaited details on Washington’s planned $700 billion bailout. Investors are worried Congress will try to change the Bush administration’s proposal. Stocks extended losses in the first ten minutes of trading, with the S&P 500 and Nasdaq falling more than 1 percent.
-Morgan Stanley has put merger talks on hold with troubled regional lender Wachovia, The Financial Times reports. Sources said the change in the bank’s status, as approved by the Fed, makes a merger with Wachovia or a similar institution less necessary. But Morgan Stanley will continue with talks over the sale of a large stake to China Investment Corp, the state investment fund – a move that would give it fresh capital.
-Washington Mutual is continuing talks with potential buyers amid mounting pressure from federal regulators. The Seattle thrift has drawn interest from potential suitors such as Citigroup Inc., J.P. Morgan Chase & Co., Wells Fargo & Co. and Banco Santander SA of Spain, according to The Wall Street Journal.
-The group of seven finance ministers and central bank governors are maintaining "heightened close cooperation," and pledged to take the actions needed to safeguard the international financial system. The group welcomes the “extraordinary” actions taken by the U.S. government to take illiquid assets off banks’ balance sheets.























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