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| Money
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| US banks make shock status switch |
| The last two major investment banks in the US have changed their status to become bank holding companies, allowing them to take deposits from investor
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| UNITED STATES OF AMERICA
, 22-September-2008
3:14:47 AM |
| The changes should enable Goldman Sachs and Morgan Stanley to raise more funds by opening commercial banks.
The move - part of a huge restructuring effort on Wall Street - will also give them access to Federal Reserve support.
The US government has announced a $700bn (£382bn) package to tackle the worst financial crisis for decades.
Congress is considering the plan, drawn up by Treasury Secretary Henry Paulson, which would set up a fund to buy back much of the bad debt held by financial institutions, which had triggered the credit crisis.
'Greater safety'
There had been fears, given the recent turbulence in the financial markets, that Morgan Stanley and Goldman Sachs would not be able to survive as independent players, and both their share prices have come under pressure.
Both banks had filed requests with the Federal Reserve to change their status, and late on Sunday, the Fed announced it had granted the requests.
The last few weeks have seen dramatic and unexpected changes among banks, with Merrill Lynch being bought by Bank of America and Lehman Brothers filing for bankruptcy protection.
Earlier this year, Bear Stearns was acquired by JP Morgan Chase.
Commenting on the change for Morgan Stanley and Goldman Sachs, Chip MacDonald, mergers partner at law firm Jones Day, said: "It creates a perception of greater safety and supervision. It really rationalises the regulatory system".
"It should be good for both Goldman Sachs and Morgan Stanley."
Solution sought
Mr Paulson has urged other countries to follow the American example in dealing with the international financial crisis.
Both presidential candidates have been having their say about the financial crisis.
Republican John McCain said President George W Bush should take the blame for the crisis along with both parties in Congress.
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