What & why:What
The Federal Reserve said Sunday 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 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.
The move by Goldman and Morgan Stanley is not in order to take deposits (at least not in the short term), but to be able to get money from the Fed.
The system is broken. It probably should be allowed to crumble under its own weight at this point. Let's have a lock-up of the financial system for, what, one month? Countries have recovered from worse (e.g war). Propping up a rotten system is no cure.
You want a bank? Then charter the Bank of the United States for five years. Make that the entity that grants loans to manufacturers and retailers and importers. Face it, some banks are totally insolvent and should just go away. Others, like Wells Fargo, are well managed (WFC is the only bank with an AAA rating) and will continue.