Goldman Sachs and Morgan Stanley will no longer be investment banks, says the New York Times. Instead, they will “transform themselves into bank holding companies subject to far greater regulation.”

The firms requested the change themselves, even as Congress and the Bush administration rushed to pass a $700 billion rescue of financial firms. It was a blunt acknowledgment that their model of finance and investing had become too risky and that they needed the cushion of bank deposits that had kept big commercial banks like Bank of America and JPMorgan Chase relatively safe amid the recent turmoil.

It also is a turning point for the high-rolling culture of Wall Street, with its seven-figure bonuses and lavish perks for even midlevel executives. It effectively returns Wall Street to the way it was structured before Congress passed a law during the Great Depression separating investment banking from commercial banking, known as the Glass-Steagall Act.

Former FDIC chairman William Isaac told Bloomberg:

“The decision marks the end of Wall Street as we have known it. It’s too bad.”

Shift for Goldman and Morgan Marks the End of an Era [NYT]
Goldman, Morgan Stanley Bring Down Curtain on an Era (Update3) [Bloomberg]
(AP Photo/Mark Lennihan)

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