Monday, September 22, 2008

Morgan, Goldman Now Banks; Wachovia Left Out in the Cold

Both Morgan Stanley and Goldman Sachs lobbied the Federal Reserve to become bank holding companies over the weekend.  Their bid was approved by the Fed, ending the era of the independent investment bank.  Both Morgan and Goldman will now be subject to much stricter capital requirements and regulatory oversight.  Although the transition into a bank holding company will reduce their chances of making outsize returns on equity in the future, it allows them to remain independent. 
Morgan Stanley has apparently abandoned merger talks with Wachovia as it found Mitsubishi a willing investor in the firm.  Mitsubishi UFJ will pay $8.4 billion for a 20% stake in Morgan Stanley.  This leaves Wachovia out in the cold.  The bank still has problem assets it needs to unload and is searching for more capital.  Mr. Paulson better speed that plan through.  Too bad that investors who understand how bad this is for Wachovia can't short the stock...

1 comment:

Reggie said...

Sell, Mortimer! Sell!