dude it means that they have to bring down their leverage fast. Now they are commercial banks, no more 30 times leverage, not even 20 times lol. Basically no more herculean growth.
It means my XLF calls are in the money now. Never doubt the will of Socialist Capitalists to hold up the system, especially when you live in a 50 room mansion and have hand waiters. The leverage would have disappered anyway, if they could have survived. But now, like the previous poster said, they are commercial banks with the Fed right there. Wow. I'm bullish til about 9:40.
Sept. 21 (Bloomberg) -- The Federal Reserve Board approved the applications of Morgan Stanley and Goldman Sachs Group Inc. to become bank holding companies, the Fed said. ``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,'' the central bank said in an e-mailed press release in Washington.
Wall Street Journal The Federal Reserve said it had approved the transformation of both Morgan Stanley and Goldman Sachs 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 Fed said it would also extend additional lending to the broker-dealers of the two firms, in addition to Merrill Lynch's, as they make the transition. The steps effectively mark the end of Wall Street as it has been known for decades, and formalizes a quid-pro-quo that regulators have warned about in the months after Bear Stearns's near collapse -- in return for access to the Fed's emergency lending facilities, the firms would need to subject themselves to more oversight. The step could have far reaching effects on their profitability and their business models. http://online.wsj.com/article/SB122204751200261685.html
5 day waiting period/anti trust. But Fed will backstop starting tomorrow. Think the boys at GS have a little comedown here? Or are they back to their old tricks first chance? (rhetorical. You don't have to answer) OKs Goldman Sachs, Morgan Stanley switch to bank holding companies WASHINGTON - The Federal Reserve said Sunday it had granted a request by the last two major U.S. investment banks â Goldman Sachs and Morgan Stanley â 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. Shares of both institutions had come under pressure ever since the bankruptcy filing last week by investment bank Lehman Brothers and the forced sale of investment bank Merrill Lynch to Bank of America. Investors feared that the last remaining independent investment banks would not be able to survive in their current form. There had been speculation that both institutions would be acquired by commercial banks, whose ability to take deposits would give them a stable source of funding. The decision by the two giants of finance to get approval from the Fed to change their own status represented another dramatic development in one of the most turbulent periods in Wall Street history. In the surprise announcement late Sunday, the central bank said that to provide increase funding support to the two institutions during the transition period, they would be allowed to get short-term loans from the Federal Reserve Bank of New York against various types of collateral. Copyright 2008 The Associated Press. All rights WARNING: This e-mail is a suspected phishing scam.
Good or Bad, it means Goldman Sachs and Morgan Stanley will have to meet strict Captial Reserve Ratios or Leverage Ratios. No more levered ie...30:1. They are no longer "Quasi Hedge Funds" It also means the "yield curve" will now get very steep!!! :eek:
They'll still have hyper-levereged investment arms. This means they can have a unit known as a bank that can go to the taxpayer for big money like the rest of the banks. It puts them in the pool of $2.5T. Anything for Hank Paulson's alma matter; they made him what he is - he owes them and we get to pay for it.
Just hearing about this. Not much reaction in the futures, all things considered. Frankly, I don't care much about the stock price. The point is to avoid total failure and corp debt destruction.
just imagine. they've agreed to 10:1 leverage and oversight. What were they looking at behind door #2?