From the NYT we learn the rules have changed again:
Announced without fanfare on Sunday night, the move signals the final end to the Glass-Steagall Act, the epochal legislation of 1933 that signaled a split between investment banks and retail banks. A law passed in 1999 repealed the earlier regulation, though Goldman and Morgan remained independent investment banks.
Morgan Stanley had sought other ways to bolster its capital, and had been in advanced talks with China’s sovereign wealth fund and others about raising as much as $30 billion, people briefed on the matter said Sunday night.
By becoming bank holding companies, Goldman Sachs and Morgan Stanley gained some breathing room in the immediate term. But it likely lays the groundwork for additional deal making. Given the expected bank failures this year, it is possible Goldman and Morgan Stanley could seek to buy them cheaply in a “roll-up” strategy.
Prior to the move, federal regulations prohibited the two investment banks from pursuing such deals. Indeed, Morgan Stanley’s recent talks with Wachovia revolved around Wachovia buying Morgan Stanley.
Being a bank holding company would also give the two access to the discount window of the Federal Reserve. While they have had access to Fed lending facilities in recent months, regulators had planned to take away discount window access in January.
The regulation by the Federal Reserve brings a host of accounting rule changes that should benefit the two banks in the current environment.
In return, they will submit themselves to greater regulation, including limits on the amount of debt they can take on. When it collapsed, Lehman had about a 30:1 debt-to-equity ratio, meaning it had borrowed $30 for every dollar in capital it held. Morgan Stanley currently has a debt-to-equity ratio of 30:1, while Goldman Sachs has one of about 22:1.
Bank of America, on the other hand, currently has about an 11:1 leverage ratio, while JPMorgan has about 13:1 and Citigroup about 15:1. Because they can borrow less, bank holding companies typically have lower earnings multiples.
More regulation is good, just depends on who the hell is doing it. The EPA in it's present form sucks ass, as an example of a worthless governmental agency that was designed to watchdog our air, water and natural resources.
The next President is saddled with a real friggin mess..new regulations will have to be crafted and you know the lobbyists will be there every inch of the way. Bush has already seen to it the next President can't change any of the current bailouts. Bailouts rumored to be up to a Trillion large...
I got a headache from this horseshit.