Goldman, Morgan to Become Bank Holding Companies...

[Zim Hosein]

In one of the biggest changes to Wall Street in decades, Goldman Sachs and Morgan Stanley, the last two independent investment banks, will become bank holding companies, the Federal Reserve said Sunday night.

The move fundamentally changes one of the mainstays of modern Wall Street. It heralds new regulations and supervisions of previously lightly regulated investment banks.

The move comes after the bankruptcy of Lehman Brothers and the near-collapses of Bear Stearns and Merrill Lynch.

Being a bank holding company would give Morgan and Goldman 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 leverage they can take on.

Goldman, Morgan to Become Bank Holding Companies

What exactly is a "holding" company?

 

[SagaLore]

I won't say why, but this is very good news for me.

 

[The Boston Dangler]

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

A holding company is a company that owns part, all, or a majority of other companies' outstanding stock. It usually refers to a company which does not produce goods or services itself, rather its only purpose is owning shares of other companies. Holding companies allow the reduction of risk for the owners and can allow the ownership and control of a number of different companies. In the U.S., 80% or more of voting stock must be owned before tax consolidation benefits such as tax-free dividends can be claimed.


there ya go. holding companies own other companies. instead of "we're in deep shit!" they can say "that other office is in deep shit!"

 

[TheWart]

It seems to mean that like a 'normal' bank, MS and GS can now accept deposits.....however, what this will due to their beta/stock price to reflect their 'normal' bank operations remains to be seen...

 

[darkswordsman17]

Hmm, this is quite interesting. So, basically, they get to manage banks (via holding control), with the benefit of getting Fed lending services, and in return they basically tabs of everything and submit it to the Fed? Basically they're serving as accountants/auditors for banks? How many fall under their holding jurisdiction?

 

[FallenHero]

Originally posted by: SagaLore
I won't say why, but this is very good news for me.

 

[IronWing]

Does this give them FDIC coverage on their accounts? Maybe buying auto insurance after you hit the tree?

 

[Zim Hosein]

Originally posted by: The Boston Dangler
http://en.wikipedia.org/wiki/Holding_company

A holding company is a company that owns part, all, or a majority of other companies' outstanding stock. It usually refers to a company which does not produce goods or services itself, rather its only purpose is owning shares of other companies. Holding companies allow the reduction of risk for the owners and can allow the ownership and control of a number of different companies. In the U.S., 80% or more of voting stock must be owned before tax consolidation benefits such as tax-free dividends can be claimed.

there ya go. holding companies own other companies. instead of "we're in deep shit!" they can say "that other office is in deep shit!"

I'll admit I know very little on the subject, but aren't individual shareholders "holders" as well, just on a much smaller scale The Boston Dangler?

 

[Aharami]

Originally posted by: SagaLore
I won't say why, but this is very good news for me.

?

 

[The Boston Dangler]

shareholders own shares in the parent company, not the child company (until spun off). i think this arrangement serves as some protection should one branch struggle, or fail, but i might be wrong. i always thought of holding companies in one of two ways: mega-corporations (businesses are their business - berkshire hathawy, kbr) and bahamian post office boxes for the purposes of fraud.

 

[JS80]

Originally posted by: The Boston Dangler
http://en.wikipedia.org/wiki/Holding_company

A holding company is a company that owns part, all, or a majority of other companies' outstanding stock. It usually refers to a company which does not produce goods or services itself, rather its only purpose is owning shares of other companies. Holding companies allow the reduction of risk for the owners and can allow the ownership and control of a number of different companies. In the U.S., 80% or more of voting stock must be owned before tax consolidation benefits such as tax-free dividends can be claimed.


there ya go. holding companies own other companies. instead of "we're in deep shit!" they can say "that other office is in deep shit!"

lol...try again dude.

OP they are essentially becoming true "banks" which = more regulation and access to the Fed discount window.

 

[LegendKiller]

Originally posted by: JS80

Originally posted by: The Boston Dangler
http://en.wikipedia.org/wiki/Holding_company

A holding company is a company that owns part, all, or a majority of other companies' outstanding stock. It usually refers to a company which does not produce goods or services itself, rather its only purpose is owning shares of other companies. Holding companies allow the reduction of risk for the owners and can allow the ownership and control of a number of different companies. In the U.S., 80% or more of voting stock must be owned before tax consolidation benefits such as tax-free dividends can be claimed.


there ya go. holding companies own other companies. instead of "we're in deep shit!" they can say "that other office is in deep shit!"

lol...try again dude.

OP they are essentially becoming true "banks" which = more regulation and access to the Fed discount window.

Pretty much. That and they get access to better capital structures that non-banks don't get.

 

[The Boston Dangler]

Originally posted by: JS80

Originally posted by: The Boston Dangler
http://en.wikipedia.org/wiki/Holding_company

A holding company is a company that owns part, all, or a majority of other companies' outstanding stock. It usually refers to a company which does not produce goods or services itself, rather its only purpose is owning shares of other companies. Holding companies allow the reduction of risk for the owners and can allow the ownership and control of a number of different companies. In the U.S., 80% or more of voting stock must be owned before tax consolidation benefits such as tax-free dividends can be claimed.


there ya go. holding companies own other companies. instead of "we're in deep shit!" they can say "that other office is in deep shit!"

lol...try again dude.

OP they are essentially becoming true "banks" which = more regulation and access to the Fed discount window.

ok, you answer the op's question. What exactly is a "holding" company?

 

[darkswordsman17]

Originally posted by: The Boston Dangler

Originally posted by: JS80

Originally posted by: The Boston Dangler
http://en.wikipedia.org/wiki/Holding_company

A holding company is a company that owns part, all, or a majority of other companies' outstanding stock. It usually refers to a company which does not produce goods or services itself, rather its only purpose is owning shares of other companies. Holding companies allow the reduction of risk for the owners and can allow the ownership and control of a number of different companies. In the U.S., 80% or more of voting stock must be owned before tax consolidation benefits such as tax-free dividends can be claimed.


there ya go. holding companies own other companies. instead of "we're in deep shit!" they can say "that other office is in deep shit!"

lol...try again dude.

OP they are essentially becoming true "banks" which = more regulation and access to the Fed discount window.

ok, you answer the op's question. What exactly is a "holding" company?

He did. The OP wanted to know what it meant in the context of what is happening in this situation, not what the actual definition is.

 

[The Boston Dangler]

could someone provide me with the actual definition?

 

[jman19]

Originally posted by: LegendKiller

Originally posted by: JS80

Originally posted by: The Boston Dangler
http://en.wikipedia.org/wiki/Holding_company

A holding company is a company that owns part, all, or a majority of other companies' outstanding stock. It usually refers to a company which does not produce goods or services itself, rather its only purpose is owning shares of other companies. Holding companies allow the reduction of risk for the owners and can allow the ownership and control of a number of different companies. In the U.S., 80% or more of voting stock must be owned before tax consolidation benefits such as tax-free dividends can be claimed.


there ya go. holding companies own other companies. instead of "we're in deep shit!" they can say "that other office is in deep shit!"

lol...try again dude.

OP they are essentially becoming true "banks" which = more regulation and access to the Fed discount window.

Pretty much. That and they get access to better capital structures that non-banks don't get.

Yep, they can eat at the gov't trough and start their own commercial deposit companies now if they wish. The old bulge bracket monoline IBs are basically dead.

 

[ponyo]

This era of bull market for hedgefunds is probably over as well. Over the last 10 years, you saw an explosion of the number of hedgefunds. Investment banks provided lot of the funding hedgefunds used to leverage ridiculous times their capital and lot of that has disappeared now and going forward. Expect to see lot more blowups at various hedgefunds as they unwind and we should see lot fewer funds in the future. Without the ability to short and leverage, these funds can't massively outperform and basically becomes another mutual fund.

It's amazing what has happened the past two weeks. The entire financial landscape of the US and the world has changed.

 

[nageov3t]

I don't know if this is good news for me or not...

Goldman Sachs invested a couple hundred million into my company a couple months ago -- anything that increases their stability is probably good for me, but who knows. /shrug

 

[JJChicken]

Originally posted by: loki8481
I don't know if this is good news for me or not...

Goldman Sachs invested a couple hundred million into my company a couple months ago -- anything that increases their stability is probably good for me, but who knows. /shrug

Probably wouldn't affect your company at all. They are just an investor in your company and if worse comes to worse and they had to sell their shares, a ready buyer would purchase them. As this transaction would be extrageneous to your company, your company would not be affected by the sale. I'm assuming you work for a public company though.

 

[runzwithsizorz]

Gee, Ya learn something new every day. I thought the Holding Company just worked with Big Brother, and Janis Joplin.

 

[ivan2]

Originally posted by: FallenHero

Originally posted by: SagaLore
I won't say why, but this is very good news for me.

way to add to the confusion guys...

 

[darkxshade]

Originally posted by: ivan2

Originally posted by: FallenHero

Originally posted by: SagaLore
I won't say why, but this is very good news for me.

way to add to the confusion guys...

I won't say why, but this is very bad news for me.

 

[SagaLore]

Originally posted by: darkxshade

Originally posted by: ivan2

Originally posted by: FallenHero

Originally posted by: SagaLore
I won't say why, but this is very good news for me.

way to add to the confusion guys...

I won't say why, but this is very bad news for me.

I'm sorry to hear that, have a and :beer: on me

 

[JS80]

Originally posted by: Barack Obama

Originally posted by: loki8481
I don't know if this is good news for me or not...

Goldman Sachs invested a couple hundred million into my company a couple months ago -- anything that increases their stability is probably good for me, but who knows. /shrug

Probably wouldn't affect your company at all. They are just an investor in your company and if worse comes to worse and they had to sell their shares, a ready buyer would purchase them. As this transaction would be extrageneous to your company, your company would not be affected by the sale. I'm assuming you work for a public company though.

Unless the money is callable, then the company is screwed.

 

[JS80]

Originally posted by: Naustica
This era of bull market for hedgefunds is probably over as well. Over the last 10 years, you saw an explosion of the number of hedgefunds. Investment banks provided lot of the funding hedgefunds used to leverage ridiculous times their capital and lot of that has disappeared now and going forward. Expect to see lot more blowups at various hedgefunds as they unwind and we should see lot fewer funds in the future. Without the ability to short and leverage, these funds can't massively outperform and basically becomes another mutual fund.

It's amazing what has happened the past two weeks. The entire financial landscape of the US and the world has changed.

If the i-bankers of GS and MER decide they don't want to work for "banks" they may go out and start their own hedge fund which may offset some of the current closures.

But I agree with you, hedge funds will become a glorified mutual fund,