"Goldman Sachs and Morgan Stanley, the last two independent investment banks, will become bank holding companies, the Federal Reserve said Sunday night, fundamentally altering the landscape of Wall Street.
The move fundamentally changes one of the mainstay models of modern Wall Street, the independent investment bank, soon after the federal government unveiled the biggest market rescue since the Great Depression. It heralds new regulations and supervisions of previously lightly regulated investment banks. 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."...
..."Announced without fanfare on Sunday night, the move signals the final end to the Glass-Steagall Act, the epochal legislation of 1933 that signaled a split between investment banks and retail banks. A law passed in 1999 repealed the earlier regulation, though Goldman and Morgan remained independent investment banks."...
..."In return, they will submit themselves to greater regulation, including limits on the amount of debt they can take on. When it collapsed, Lehman had about a 30:1 debt-to-equity ratio, meaning it had borrowed $30 for every dollar in capital it held. Morgan Stanley currently has a debt-to-equity ratio of 30:1, while Goldman Sachs has one of about 22:1." More>>>>
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