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Re: Goldman Sachs, Morgan Stanley: Playing It Safer
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Goldman Sachs need not worry. Paulson will bail them out, along with the half BILLION in GS stocks he still holds.

Correction, YOU as a taxpayer will bail them out.

Isn't capitalism FUN especially when the mega rich need SOCIALISM to keep them in their Hamptons mansions and Aspen chalets.

Posted on: 2008/9/23 14:26
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Re: Goldman Sachs, Morgan Stanley: Playing It Safer
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Goldman and Morgan Stanley change investment status, submit to more regulation

by The Associated Press
Monday September 22, 2008, 7:31 AM

The Federal Reserve yesterday said it had granted a request by the country's last two major investment banks -- Goldman Sachs and Morgan Stanley -- 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.

The request for the change to bank holding companies was granted by a unanimous vote of the Fed's board of governors during a late Sunday meeting in Washington.

The change of status means both companies will come under the direct regulation of the Federal Reserve, which regulates the nation's bank holding companies. The banking subsidiaries of the two institutions will face the stricter regulations that commercial banks are required to meet. Previously, the primary regulator for Goldman and Morgan Stanley was the Securities and Exchange Commission.

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.

The Fed said its action would take final effect after a five-day waiting period required under law.

The decision means that the Goldman and Morgan Stanley will be able not only to set up commercial bank subsidiaries to take deposits, giving them a major resource base, but they will also have the same access as other commercial banks to the Fed's emergency loan program.

After the collapse of Bear Stearns and its forced sale to JP Morgan Chase last March, the Fed used powers it had been granted during the Great Depression to extend its emergency loans to investment banks as well as commercial banks. However, that extension was granted on a temporary basis.

But as commercial banks, Goldman Sachs and Morgan Stanley will have permanent access to emergency loans from the Fed, the same privilege that other commercial banks enjoy.

The action by the Fed's board of governors in Washington came on a day when the Bush administration continued to campaign for quick congressional approval of its request for authority to use $700 billion to purchase a mountain of bad mortgage debt held by financial companies. The effort represented the boldest action yet aimed at stabilizing chaotic financial markets.

Democrats in Congress said they would demand provisions in the bailout measure to protect people in danger of losing their homes as well as seeking to cap executive compensation at firms who get to unload their bad mortgages debt onto the government. But the proposal was expected to win quick congressional passage because both parties are concerned about the adverse reaction in financial markets should the measure look like it was being delayed.

Posted on: 2008/9/23 6:11
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Re: Goldman Sachs, Morgan Stanley: Playing It Safer
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I was in the elevator with a neighbor who works for Morgan Stanley this evening and she said "we take deposits now like any other bank, wild huh?".

Thoughts?

Posted on: 2008/9/22 23:23
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Goldman Sachs, Morgan Stanley: Playing It Safer
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Goldman Sachs, Morgan Stanley: Playing It Safer
Business Week: September 22, 2008

From now on, the chastened investment banks will act more like conventional big banks, prudent and risk-averse

With their historic moves to become commercial banks, Goldman Sachs Group (GS) and Morgan Stanley (MS) have ducked the financial disaster that befell bankrupt Lehman Brothers (LEH) and led to panic sales for Bear Stearns (JPM) and Merrill Lynch (MER), but the firms will never be the same. The swashbuckling, risk-taking, and financially ingenious investment banks that produced stellar returns for years?and turned Wall Street into a stunningly lucrative place for even the most junior staffers?are fast becoming distant memories. Instead, Wall Street observers say, these firms will now operate like conventional big banks whose bywords will be prudence, far more careful risk management. and less of the financial inventiveness that spawned the subprime crisis and its myriad toxic offspring.

"It's the end of an era of extraordinary leverage," says Sherry Cooper, global economist strategist for Toronto's BMO Financial Group. "The U.S. financial system is deleveraging, and the 25-to-1 or 30-to-1 leverage ratios at those institutions are just not tolerated any longer by the financial markets. Now, under traditional banking regulation, they have to have more capital and less leverage. So their proprietary trading desks won't be nearly as active or taking as much risk as before."
Way Less Rewarding

Read the rest here:
http://www.businessweek.com/bwdaily/d ... +-+temp_news+%2B+analysis

Posted on: 2008/9/22 23:22
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