WASHINGTON – The biggest Wall Street restructuring since the Depression continued last night as the Federal Reserve dropped another bombshell – granting a request by the country’s last two stand-alone investment banks, Goldman Sachs and Morgan Stanley, to also operate as commercial banks.
It means the Wall Street giants will be able to buy a commercial bank, merge with one, or create their own banking subsidiaries to offer checking and savings accounts to the general public, just like Citibank, JPMorgan Chase and hundreds of others.
Since their new incarnation as both investment and commercial banks will let them take deposits, they’ll have a more stable source of funding that hopefully will keep them from going the way of bankrupt Lehman Brothers.
The two banks will also be eligible for short-term loans from the Federal Reserve – but will be subject to far more government regulation.
The move – which technically lets Goldman and Morgan form bank holding companies – is expected to take the pressure off the two New York-based companies, which have a combined total of 86,000 employees.
They had both been under pressure since the bankruptcy last week of Lehman and the forced sale of Merrill Lynch to Bank of America.
Meanwhile, Mayor Bloomberg and state Attorney General Andrew Cuomo were touted yesterday as white knights who could help rescue America from the massive financial meltdown.
Bloomberg was named by fellow billionaire Warren Buffett – an economic adviser to Barack Obama – as the ideal pick for “czar” of a new federal agency that would oversee the Bush administration’s proposed $1 trillion mortgage and bank bailout.
Bloomberg later told NBC’s “Meet the Press” “Well, number one, I’d do anything that the country asked me to do, but I do have a job in New York. I’ve committed myself to the voters and the taxpayers and the citizens of New York.”
Republican John McCain told CBS’s “60 Minutes” that if he wins the White House this fall, he would tap Democrat Cuomo as the Securities and Exchange Commission chairman.
“This may sound a little unusual, but I’ve admired Andrew Cuomo,” said McCain, who intends to force out SEC boss Chris Cox if elected. “I think he is somebody who could restore some credibility, lend some bipartisanship to this effort.”
Cuomo’s spokesman refused comment.
The intriguing scenarios were raised as Treasury Secretary Henry Paulson urged Congress to quickly approve the bailout package, which he said yesterday should also include foreign-owned banks that operate in the United States.
In another development, Democratic legislators found faults in the federal bailout plan, saying it needs new protections for taxpayers and cash-strapped homeowners.
“We will not simply hand over a $700 billion blank check to Wall Street and hope for a better outcome. Democrats will act responsibly to insulate Main Street from Wall Street,” said House Speaker Nancy Pelosi, who believes the mortgage-rescue package lacks several necessary safeguards.
She said Congress would take action this week to protect taxpayers’ interests and to ensure the plan includes “independent oversight, protections for homeowners, and constraints on excessive executive compensation.” With AP