Fed extends credit to Morgan Stanley, Goldman | business | Hindustan Times
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Fed extends credit to Morgan Stanley, Goldman

The US Federal Reserve Board has agreed to applications by investment banks Morgan Stanley and Goldman Sachs to become bank holding companies.

business Updated: Sep 22, 2008 11:25 IST

The US Federal Reserve Board has agreed to applications by investment banks Morgan Stanley and Goldman Sachs to become bank holding companies.

The rate-setting central bank said in a statement that the approval was granted, pending a five-day antitrust waiting period.

The Fed, which has spearheaded an ongoing government effort to halt a financial panic that has constricted the flow of private credit, said it was motivated by a desire "to provide increased liquidity support to these firms as they transition to managing their funding within a bank holding company structure."

The Federal Reserve Bank of New York, the Fed's regional affiliate, will be able to make loans to the US broker-dealer subsidiaries of Goldman Sachs and Morgan Stanley. The loans will use a recently widened spectrum of securities as collateral.

In addition, the Federal Reserve Board also authorized credit to be extended to the London-based broker-dealer subsidiaries of both firms and Merrill Lynch, which was taken over last week in an emergency sale to Bank of America.