Friday’s now of course are Failure Friday because that’s when the FDIC announces new bank failures while Sunday is reserved for bombshell financial announcements.
This Sunday is no exception. Goldman Sachs and Morgan Stanley will now become bank holding companies rather than investment banks. While this does allow them to pony up to the Fed window, it also means vastly more governmental oversight and a reduced profit margin as they can only leverage 12-to-1 rather then their current 30 or 40 to 1. So, I doubt they’re happy about this.
Hank the Hammer does drive tough deals. The AIG bailout terms were hardball. So, now while GS and MS are allowed to live (and may well buy WaMu and Wachovia) most everything about their business model changes.