Changing status - what does it mean?

[Hivemindgammahydra7]

Could someone please explain this move in simple language. :dontknow:

"WASHINGTON - 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."

http://news.yahoo.com/s/ap/bank_change

[Drumblebum]

http://en.wikipedia.org/wiki/Bank_holding_company

Becoming a bank holding company makes it easier for the firm to raise capital than if it remained a traditional bank. It can assume debt of shareholders on a tax free basis, borrow money, acquire other banks and non-bank entities more easily, and issue stock with greater ease. It also has a greater legal authority to repurchase its own stock once issued.

The downside includes greater levels of regulation, especially if there are more than 300 shareholders, at which point the bank holding company is forced to file with the Securities and Exchange Commission. There are also added expenses of operating with an extra layer of administration. This is usually offset by the fact that BHCs are often exempt from many of the state regulations and fees that a traditional bank would face.

[Ares]

It means they are now under the protection of the FED, so that they cannot go bankrupt.

[MorganTheGoat]

I think this means they are going to be the agents for the bailout/scam being proposed.

[ladygoldisliberty]

Could someone please explain this move in simple language. :dontknow:

"WASHINGTON - 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."

http://news.yahoo.com/s/ap/bank_change

very briefly:

They will be allowed to use far less leverage (or gearing). As investment banks, the top five (now all gone) they were in the 32:1 or greater gearing due to derivative. The usual commercial bank paradigm is 10:1, BUT the day-to-day, is closer to 11.5:1 or even 12:1.

They have bought some time to try to make more deals and unwind the hundreds of billions of notional value of derivatives for which the $700 Billion proposed bailout is intended.

Finally, it puts Goldman and Morgan Stanley in a perfect position at what I'll call the 20.1-mile marker of the new marathon of bank failures to come in the next eighteen months: They will be able to gobble up those who "bonk," or fade from financial exhaustion; remember the current estimates are that as many as one thousand smaller banks will fail as this crisis continues.

Hope this helps.

[Ares]

very briefly:

They will be allowed to use far less leverage (or gearing). As investment banks, the top five (now all gone) they were in the 32:1 or greater gearing due to derivative. The usual commercial bank paradigm is 10:1, BUT the day-to-day, is closer to 11.5:1 or even 12:1.

They have bought some time to try to make more deals and unwind the hundreds of billions of notional value of derivatives for which the $700 Billion proposed bailout is intended.

Finally, it puts Goldman and Morgan Stanley in a perfect position at what I'll call the 20.1-mile marker of the new marathon of bank failures to come in the next eighteen months: They will be able to gobble up those who "bonk," or fade from financial exhaustion; remember the current estimates are that as many as one thousand smaller banks will fail as this crisis continues.

Hope this helps.

Makes sense, The very things Thomas Jefferson warned us about over 200 years ago. Will we ever learn?

[mouse]

It also means that Wachovia and WaMu are Dead. SHORT ALERT - if only you could. Buy some puts and fast. Wacko and Wamu goes down, probably tomorrow.

[phideaux]

Whatever it means, it means the Fed is desperate. They are digging down to the bottom of their bag of dirty tricks to keep the grease flowing.

[cigarlover]

It means they can now get to the head of the line for our tax dollars and as others said, they will probably be in charge of using taxpayer money to try and fix the mess they created. Of course they will charge a hefty sum to do this.

[Hivemindgammahydra7]

I figured it had to be dirty, but I just didn't grasp the mechanics of it. Many thanks for the concise explanation, which has greatly helped me to understand.

[GoldRocks]

Lipstick + Pig = Pig

[etc]

That's right - the banks will not be allowed to go bankrupt. *You* will be allowed to go bankrupt.

[extremist]

This also means that the banksters can now open retail locations to accept cash directly from depositors off the street. In the near future, you may well be able to walk into your local branch of Goldman Sachs or Morgan Stanley, and wait in line to be robbed.

[Mined Games]

The talking heads on CNBC were saying that GS and MS would not change their everyday operations much, in light of the status change. But the one thing that caught my attention was that they will be granted an "exemption" that would allow them to remain in the commodity brokerage business, which apparently is not normally allowed for regular banks. So I guess they will retain their ability to short the hell out of the PM sector.:confused_ma: