On Sunday night the Federal Reserve agreed to convert the last two remaining investment banks, Goldman Sachs and Morgan Stanley into traditional bank holding companies.
The WSJ reported that this “extraordinary measure” basically means that Wall Street as its long been known will cease to exist.
Wall Street’s two most prestigious institutions will come under the close supervision of national bank regulators, subjecting them to new capital requirements, additional oversight, and far less profitability than they have historically enjoyed.
These actions “constitute a powerful statement by the Federal Reserve as to its views on the safety and soundness of these institutions,” said H. Rodgin Cohen, chairman of the Sullivan & Cromwell law firm and a top adviser to financial institutions.
Instead of being overseen just by the Securities and Exchange Commission, Goldman Sachs and Morgan Stanley will now face much stricter oversight from numerous federal agencies.
The Federal Reserve will regulate the parent companies, the Comptroller of the Currency will oversee the national bank charters, and the Federal Deposit Insurance Corp. will likely play a bigger role because the companies are expected to seek much higher volumes of federally backed deposits.