Goldman Sachs and Morgan Stanley, the last two independent investment banks, will become bank holding companies, says the Federal Reserve, a move that will fundamentally alter the landscape of Wall Street.
The move alters one of the models of modern Wall Street, the independent investment bank, soon after the federal government unveiled the biggest market intervention since the New Deal. It heralds new regulations and supervision of previously lightly regulated investment banks, as well as an end to the outsize paychecks that helped shape the image of the chest-thumping Wall Street banker.
It is also the latest signal by the Federal Reserve that it will not let Goldman or Morgan fail. The move comes after the bankruptcy of Lehman Brothers and the near collapses of Bear Stearns and Merrill Lynch…
Being a bank holding company would also give the two banks access to the discount window of the Federal Reserve. While they have had access to Fed lending facilities in recent months, regulators had planned to take away discount window access in January.
Should be an interesting morning in the world of bourses.