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It's Sunday, so more victims: Morgan Stanley and Goldman Sachs

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  • 22-09-2008 6:26am
    #1
    SoCal90046
    Closed Accounts Posts: 192 ✭✭


    I guess they're not victims in the sense that AIG, Fannie/Freddie and Merrill were, but Morgan Stanley and Goldman Sachs today underwent a remarkable transformation.

    The Wall Street Journal reported that the two venerable investment banks will become bank holding companies. The two entities will now fall under the purview of national bank regulators; capital requirements will change (increase!) and consequently, profits are likely to decline. Wall Street, as it has existed for scores of years, is no more. The signal here is that the industry was likely in a much worse condition than had been suspected.

    I wonder what will happen next Sunday. This move alone would have been quite stunning had it occurred four weeks ago; however, today, it just seems like one more chapter in the unfolding saga of the housing mess.


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    #2
    brendansmith
    Registered Users Posts: 4,526 ✭✭✭brendansmith


    SoCal90046 wrote: »
    I guess they're not victims in the sense that AIG, Fannie/Freddie and Merrill were, but Morgan Stanley and Goldman Sachs today underwent a remarkable transformation.

    The Wall Street Journal reported that the two venerable investment banks will become bank holding companies. The two entities will now fall under the purview of national bank regulators; capital requirements will change (increase!) and consequently, profits are likely to decline. Wall Street, as it has existed for scores of years, is no more. The signal here is that the industry was likely in a much worse condition than had been suspected.

    I wonder what will happen next Sunday. This move alone would have been quite stunning had it occurred four weeks ago; however, today, it just seems like one more chapter in the unfolding saga of the housing mess.


    Any chance you could dumb this down abit. Im very interested but dont understand fully!
    Stock mnarket gone??


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    #3
    SoCal90046
    Closed Accounts Posts: 192 ✭✭SoCal90046


    brendansmith wrote: »
    Any chance you could dumb this down abit. Im very interested but dont understand fully!
    Stock mnarket gone??

    The stock market's still there--unless you heard something!! :eek:

    Morgan Stanley and Goldman Sachs were investment banks that didn't fall under the regulatory authority of the Federal Reserve: now they do. The range of products in which they can invest is now, likely, limited. They won't be able to invest in the risky sort of assets that once the mainstay of such banks.


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    #4
    brendansmith
    Registered Users Posts: 4,526 ✭✭✭brendansmith


    But what does this meen for me?


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    #5
    SoCal90046
    Closed Accounts Posts: 192 ✭✭SoCal90046


    brendansmith wrote: »
    But what does this meen for me?

    My guess is nothing, unless you work for either of those two companies. Wall Street and the markets will function as usual.


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    #6
    brendansmith
    Registered Users Posts: 4,526 ✭✭✭brendansmith


    SoCal90046 wrote: »
    My guess is nothing, unless you work for either of those two companies. Wall Street and the markets will function as usual.

    My mate works for Goldman Sachs funnily enough. Will he get fired?


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    #7
    damnyanks
    Registered Users Posts: 4,276 ✭✭✭damnyanks


    Not because of this annoucement.

    But they've fired loads already across all banks so no one is safe.

    As for the news -

    What a boring weekend! Sunday to Wednesday was great. Then it all ended! Oh well


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    #8
    SoCal90046
    Closed Accounts Posts: 192 ✭✭SoCal90046


    brendansmith wrote: »
    My mate works for Goldman Sachs funnily enough. Will he get fired?

    If margins in both firms shrink--something that's likely to happen--then there will be reduction in staffing levels; I would guess that there will be significant reductions in staffing levels, perhaps 15 to 20%.


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    #9
    OfflerCrocGod
    Registered Users Posts: 6,304 ✭✭✭OfflerCrocGod


    SoCal90046 wrote: »
    it just seems like one more chapter in the unfolding saga of the housing mess.
    Not sure if it's only the housing mess that's putting this pressure on the investment banks. I think CDSs are an issue as well; we will see how AIG fares in the next few months. If it goes under all hell will break lose....


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    #10
    SoCal90046
    Closed Accounts Posts: 192 ✭✭SoCal90046


    OfflerCrocGod wrote: »
    Not sure if it's only the housing mess that's putting this pressure on the investment banks. I think CDSs are an issue as well; we will see how AIG fares in the next few months. If it goes under all hell will break lose....

    That's a great point; these collateralized instruments seem to have the potential to cause problems. We're definitely not out of the woods yet; frankly, I would be impressed if the US economy can get through this mess without suffering a protracted downturn somewhat similar to what occurred in 1981/82.


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