Fed — ‘eff you’ to more regulation in Immunity 2.0? Goldman, Morgan now ‘banks’

Goldman Sachs and Morgan Stanley will become full-blown bank holding companies. As the blog notes, this is the last nail in the coffin, the final end to the Glass-Steagall Act.

And, why is that important?

It likely lays the groundwork for additional deal making. Given the expected bank failures this year, it is possible Goldman and Morgan Stanley could seek to buy them cheaply in a “roll-up” strategy.

Prior to the move, federal regulations prohibited the two investment banks from pursuing such deals. Indeed, Morgan Stanley’s recent talks with Wachovia revolved around Wachovia buying Morgan Stanley.

So, in essence, rather than being open to the idea of more regulation as part of the Paulson-Bernanke bailout, the Fed side, at least, seems to be saying eff you to that idea.

True, the two new banks themselves will theoretically be open to more regulation, but it seems possibly this is a way to dodge scrutiny at the same time?

Also, before this move, Stanley tried to get Chinese sovereign wealth fund backing, but could not pull it off.

So, the Chinese say our economy sucks; do Chinese wealth funds, at the same time, have any U.S. holdings they want Crazy Uncle Henry Paulson to bail out?

The xenophobia vs Wall Street would be fun for schadenfreude values, if nothing else.