Sunday, September 21, 2008

Morgan Stanley, Goldman Sachs to become bank holding companies

This Bloomberg news story announces that Morgan Stanley and Goldman Sachs have been approved to become bank holding companies.

What a difference a decade makes. A decade ago, everybody wanted to be an investment bank, and it was the commercial banks rushing to get in. It was the investment banks who could leverage their investments, thereby achieving superior returns. Now, this business model has been rendered inutile, and the name of the game is now being the fund source yourself.

It’s now way much better to be a commercial bank than an investment bank. You are funded by low-cost deposits, you have more boring but recurring income, and most importantly------you are first in line for a Fed bailout!

Hail to the new masters of the Wall St. universe, the commercial banks.

1 comment:

S@RZI said...

How are you doing, Rogue Economist? Hope you have not made the wrong decision of getting into investment banking again. Your blog's looking great.