Why did Goldman Sachs and Morgan Stanley decide to become bank holding companies?
The decision enables both firms to gain access to the Federal Reserve’s discount window — the same line of credit that is open to other depository institutions. That’s in addition to the temporary financial lifeline, called the Primary Dealer Credit Facility, that the Fed established for Wall Street broker-dealers after it bailed out Bear Stearns in March. The transformation into bank holding companies also allows Goldman Sachs and Morgan Stanley to tap into deposits from retail customers. Goldman Sachs said that over the past several weeks it began discussions with the Fed regarding the possibility of becoming a bank holding company. “We understand that the market views oversight by the Federal Reserve and the ability to source insured bank deposits as providing a greater degree of safety and soundness,” the company said in a statement. Morgan Stanley CEO and Chairman John Mack said the bank holding structure would place his firm in the “strongest possible position — with the stabilit
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