Goldman, Morgan under Fed control , give up i-bank status

WASHINGTON: Global financial services provider Goldman Sachs and Morgan Stanley will now become bank holding companies, and come directly under the purview of the Federal Reserve, a move that will entail stricter regulations for the previously lightly regulated investment banks.
“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 of the U.S. said in a statement.
This move was pursuant to the bankruptcy of Lehman Brothers and the acquisition of Merrill Lynch by Bank of America.
The transition of Goldman Sachs and Morgan Stanley from the investment banks status to a Federal Bank Holding Company would provide ongoing access to the Federal Reserve Bank discount window and expanded opportunities for funding.
“We believe that Goldman Sachs, under Federal Reserve supervision, will be regarded as an even more secure institution with an exceptionally clean balance sheet and a greater diversity of funding sources,” Goldman Sachs Chairman and Chief Executive Officer Lloyd C. Blankfein said in a statement.
Meanwhile, Morgan Stanley Chairman and Chief Executive Officer John J Mack said, “this new bank holding structure will ensure that Morgan Stanley is in the strongest possible position with the stability and flexibility to seize opportunities in the rapidly changing financial marketplace.”
In order to provide liquidity support to these banks during their transition from investment banks to regulated banks, the Federal Reserve Board has authorised the Federal Reserve Bank of New York to extend credit to the U.S. broker-dealer subsidiaries of Goldman Sachs and Morgan Stanley, the statement added.
“We view regulation by the Federal Reserve Board as appropriate and in the best interests of protecting and growing our franchise across our diverse range of businesses,” Goldman Sachs added.
These credits can be provided against all types of collateral that may be pledged at the Federal Reserve’s primary credit facility or at the existing Primary Dealer Credit Facility. — PTI
Mitsubishi UFJ to buy stake in Morgan
AP reports from Tokyo:
Mitsubishi UFJ Financial Group Inc. on Monday said it had reached an agreement to buy 10-20 per cent stake in Morgan Stanley, one of the last two major U.S. investment banks.