Goldman, Morgan Approved as Banks

123jump.com Staff
22 Sep, 2008
New York City

Goldman Sachs and Morgan Stanley sought and received approval to transform to depository institution under the supervision of Federal Reserve. Morgan Stanley agreed to sell up to 20% of stake to Mitsubishi UFJ of Japan. Crude oil and metals prices gain as dollar is expected to weaken.

[R]10:45AM New York – Goldman Sachs and Morgan Stanley transform into Fed monitored banks. Morgan Stanley agrees to sell up to 20% to Mitsubishi UFJ.[/R]

The last two remaining independent large investment banks became banking depository institution as credit crisis broadens.

Goldman Sachs will be regulated by the Federal Reserve Bank and will be the fourth largest holding company in the U.S. The investment bank founded in 1869 is one of the oldest and largest investment banks in the world has already two active deposit taking institutions Goldman Sachs Bank USA and Goldman Sachs Bank Europe PLC with a total of $20 billion in deposits.

The company in the press release noted, “We are moving assets from a number of strategic businesses, including our lending businesses, into GS Bank USA. With over $150 billion in assets, GS Bank USA will be one of the ten largest banks in the United States. While these assets are fully funded for term, they also are available to be funded by the Federal Reserve. We intend to grow our deposit base through acquisitions and organically.”

Morgan Stanley also decided to become a depository institution and agreed to sell up to 20% stake in the company to the largest financial group from Japan, Mitsubishi UFJ Financial Group. The struggling investment bank that has seen its stock fall more than 70% has been negotiating with Wachovia Bank and Chinese banks to shore up its capital. The decision to become a depository institution will help the bank to access Fed Discount Window but will be supervised by the banking regulators. The troubled investment bank had been reeling under enormous leverage that rose to as high as 33 to 1 on its balance sheet at the peak of housing market boom in 2006 and 2007.

Morgan Stanley ((MS)) stock rose $3.29 to $30.54 and Goldman Sachs ((GS)) stock traded as high as $135 but edged lower to unchanged at $129.80.

Asian Markets Review

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Europe Markets Review

In London FTSE 100 Index traded lower 13.80 or 0.26% to 5,297.50, in Paris CAC 40 Index decreased 5.28 or 0.12% to 4,319.59 and in Frankfurt DAX index traded lower 23.66 or 0.38% to 6,165.87. In Zurich trading SMI decreased 43.91 or 0.63% to 6,986.30.