THE TELEGRAPH: 'It's the end of an era. Wall Street has changed forever.” It may have been Paul Mortimer-Lee, research analyst at BNP Paribas, who spoke the words yesterday but they might have been anybody’s.
Across newswires and television channels, hundreds of commentators and bankers were making the same utterance.
Goldman Sachs and Morgan Stanley, the last venerable names of investment banking, on Monday shocked the markets by ditching their free-wheeling broker-dealer status to become regulated banks, bringing the curtain down on 75 years of Wall Street history.
Wall Street was born out of the depression era Glass-Steagall legislation of 1933 that separated investment and commercial banking. Great names such as Salomon Brothers, Paine Webber, Smith Barney and Kidder Peabody built it into the financial powerhouse it now is.
Most investment banks have since merged or been taken over as Glass-Steagall was gradually eroded through the 1990s, but the giants remained. Until now.
With Lehman Brothers dead, Merrill Lynch sold and Bear Stearns rescued, the “Masters of the Universe” tag now looks like little more than a tombstone engraving. Goldman and Morgan Stanley, by changing status, have etched their names on, too. “Some colleagues think this it is the death of Wall Street,” Mr Mortimer-Lee said.
“They remember when there were 45 broker dealers and are mourning it as the passing of an era.”
For Mr Mortimer-Lee, there is an appropriate symmetry to it all. “It is ironic that the broker dealers were born as a result of the bank and broker-dealer separation that was deemed necessary as a result of the 1930s crisis, and now broker-dealers and banks get put back together as a result of the nearest thing since to a 1930s-style crisis.” Goldman Sachs Brings to an End an Era in Investment Banking >>> By Philip Aldrick | September 22, 2008
SPIEGELONLINE INTERNATIONAL:
'Bad News for the Ferrari Salesmen of the World': The US investment banks Goldman Sachs and Morgan Stanley have announced that they will become full-service banks. Some German commentators see it as the end of the age of big gamblers. Others aren't so sure.
Right when everyone thought the roller-coaster ride of the US financial crisis was over, along came another jarring twist. Since 1933, when the Glass-Steagall Act was passed, US banks have been segregated into investment banks and retail banks. While retail banks plodded along using depositor capital, Wall Street investment banks could take enormous risks -- with enormous payoffs.
And so it was for 75 years until Sunday night's announcement that Morgan Stanley and Goldman Sachs -- America's last two independent investment banks -- had decided to switch sides and transform themselves into retail banks. In doing so, they have sounded the death knell for the Glass-Steagall structure and -- for now, perhaps -- for a high-risk, high-roller era.
In their new incarnations, Morgan Stanley and Goldman Sachs will offer consumer-banking services and gain permanent access to the discount window of the Federal Reserve. At the same time, they will be subject to the much more stringent regulations of the Fed rather than just those of the Securities and Exchange Commission. In effect, they will need to have more capital on hand relative to the amount they wish to borrow. That means less risk to play with. >>> Rachel Nolan | September 23, 2008
The Dawning of a New Dark Age – Paperback (US) Barnes & Noble >>>
The Dawning of a New Dark Age – Hardcover (US) Barnes & Noble >>>
