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

business Updated: Sep 22, 2008 11:25 IST

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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.