Sunday, September 21, 2008

From investment banks to "traditional banks"

WSJ reports:

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.



What does this mean?

In short, this heralds a new time in Wall Street where the central bank will exercise control over wall street titans like Goldman Sachs and others, a shift from privatization to disguised socialism. Now the two securities firms will have to provide increased information regarding the managing of their funding, balance sheet and business models.

Becoming traditional banks, the 2, also have increased access to direct loans from the central bank (Fed). Such a move may be considered good by those who are apprehensive of the global meltdown. This will increase the security of the banking system as a whole, and is expected to prevent further losses.

The Federal Reserve defines such a step was made to "provide increased liquidity to these firms as they transition to managing their funding within a bank holding company structure."

What are your comments and suggestions for the same? Do post your smart opinions too....

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3 comments:

  1. If they don't do that, the American people, shareholders and taxpayers alike will suffer a great recession - one that will shake the whole world. Such measures have become important considering the carelessness of the banks and fed in past.
    Federal Reserve have taken immense power in their hands to control the banking system. Its the fall of private enterprise in some ways ------
    Merrill Lynch - bought out with help of Fed
    Bear Stearns - same
    Lehman - bankruptcy, help by Fed
    AIG - bailout by Fed
    Goldman & Morgan - now them too supported by Fed

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  2. [...] Frominvestmentbanks to traditional banks [...]

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  3. We are suffering for the mistakes of time honored failed policy. The trcikle down economy have failed toactuary tables and now the middle class fits the bill. What happened to for the people by the people?

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