I Didn't See This Coming

Goldman Sachs and Morgan Stanley have gotten the Fed to agree to let them become some sort of bank holding companies. The U.S. Invesement Bank model is dead. GS and MS were the last two. From the Wall Street Journal:

"Becoming a bank holding company can help both Morgan Stanley and Goldman organize their assets, and puts both in a much better position to be acquired, to merge or to acquire smaller companies with insured deposits. It also may allow Goldman and Morgan Stanley to avoid using of mark-to-market accounting -- which forces companies to value their assets based on the current market price. Instead, these firm may be able to classify assets as "held for investment," as many banks do."

Returns will be lower going forward but access to Fed funding and higher capital requirements will make the short-side attacks of the last two weeks less likely. Retail bank desposits, money from people like you and me, are now one of the most-sought after elements of the new Wall Street business model.