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Money | 09/22/2008 11:30 am

Morgan Stanley, Goldman Sachs Change Bank Status

By The Staff at wowOwow.com

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.

2 Reader Comments (so far…) Sign In or Register to comment

HA BIBI
545 PEOPLE Politicians are the only people in the world who create problems and then campaign against them. *Have you ever wondered why, if, both the Democrats and the Republicans are against deficits, why do we have deficits? *Have you ever wondered why, if all the politicians are against inflation and high taxes, why do we have inflation and high taxes? *You and I don’t propose a federal budget. The President does. *You and I don’t have the Constitutional authority to vote on appropriations. The House of Representatives does. *You and I don’t write the tax codes. Congress does. *You and I don’t set fiscal policy. Congress does. *You and I don’t control monetary policy. The Federal Reserve Bank does. One hundred Senators, 435 Congressmen, one President, and nine Supreme Court justices. 545 human beings out of the 300 million population are directly, legally, morally, and individually responsible for the domestic problems that plague this country. I excluded the members of the Federal Reserve Board because that problem was created by the Congress. In 1913, Congress delegated its Constitutional duty to provide a sound currency to a federally chartered, but private, central bank. I excluded all the special interests and lobbyists for a sound reason. They have no legal authority. They have no ability to coerce a Senator, a Congressman, or a President to do one cotten picking thing. I don’t care if they offer a politician $1 million dollars in cash. The politician has the power to accept or reject it. No matter what the lobbyist promises, it is the legislator’s responsibility to determine how he votes. Those 545 human beings spend much of their energy convincing you that what they did is not their fault. They cooperate in this common con regardless of party. What separates a politician from a normal human being is an excessive amount of gall. No normal human being would have the gall of a speaker, who stood up and criticized the President for creating deficits. The President can only propose a budget. He cannot force the Congress to accept it. The Constitution, which is the law of the land, gives sole responsibility to the House of Representatives for originating and approving appropriations and taxes. Who is the speaker of the House? She is the leader of the majority party. She and fellow House members, not the President, can approve any budget they want. If the President vetoes it, they can pass it over his veto if they agree to. It seems inconceivable to me that a nation of 300 million can not replace 545 people who stand convicted-by present facts-of incompetence and irresponsibility. I can’t think of a single domestic problem that is not traceable directly to those 545 people. When you fully grasp the plain truth that 545 people exercise the power of the federal government, then it must follow that what exists is what they want to exist. *If the tax code is unfair, it’s because they want it unfair. *If the budget is in the red, it’s because they want it in the red. *If the military is in Iraq, it’s because they want them in Iraq. *If they do not receive social security but are on an elite retirement plan not available to the people, it’s because they want it that way. There are no insoluble government problems. Do not let these 545 people shift the blame to bureaucrats, whom they hire and whose jobs they can abolish; to lobbyists, whose gifts and advice they can reject; to regulators, to whom they give the power to regulate and from whom they can take this power. Above all, do not let them con you into the belief that there exists disembodied mystical forces like “the economy”, “inflation”, or “politics” that prevent them from doing what they take an oath to do. Those 545 people, and they alone, are responsible. They, and they alone, have the power. They, and they alone, should be held accountable by the people who are their bosses, provided the voters have the gumption to manage their own employees.
By HA BIBI on 09/22/2008 1:07 pm
Ms. Dee
Woo-hoo! Way to put it out there, Elaine. The election may be six weeks away, but between now and then, we can all be careful where we put out dollars. Our individual spending may be a vote we can cast that will have just as much influence as the one we cast on November 4.
By Ms. Dee on 09/23/2008 12:09 pm