Goldman Sachs And Morgan Stanley Become Traditional Banks
In a shocking surprise that could only be compared to the Miami Dolphins pummeling of the New England Patriots over the weekend, Goldman Sachs and Morgan Stanley are abandoning their investment banking models.
My initial reaction prior to having my first cup of coffee was indifference. The opposite of love by the way, is indifference, not hate. That’s how much I don’t like Goldman Sachs. The fact that I was formerly employed at Morgan Stanley made little difference to me.
Having enjoyed my first cup of coffee and wiped the sleep from my eyes, the wheels in my head are beginning to spin and the first question I pose to myself is whether this means Goldman will be forced to cover their short positions in Sirius XM. Will Goldmans hedge fund clients such as the now infamous “Jonesie” of SiriusBuzz radio fame now cover their short positions also as a result of being left out to dry?
Near as I can tell, the answer is going to be a resounding “yes!.” Details are sketchy as the announcement is only hours old, yet the visibility and transparency required on bank holding companies will give little wiggle room for any manipulative practices.
One benefit of an investment banking business is its research capabilities, which will be dramatically affected at GS and MS going forward. Clients could be leaving in droves which could affect Sirius XM shares. FDIC insured deposits are much less than SIPC deposits.
As for the financing needs of Sirius XM, I would remind others that Sirius XM seemingly had no intention of ever using the services of Goldman Sachs. It is more likely that the company would turn to UBS, Bank of America, Citigroup or Merrill Lynch, all of which have been extremely bullish on SIRI. Even Barclays is about to own the investment banking division of Lehman.
The net effect, is that while Goldman henchmen Mark Wienkes and Jim Cramer were busy trying to bash Sirius into non-existance, Goldman instead fell victim to its own practices. Imagine that! Mark Wienkes a bank teller! I can’t wait to see that!
Today is a good day to be a Sirius fan, and a Dolphin fan for that matter!
Position: Long Sirius.
too funny…lol at goldman.
hope your analysis is correct…I have not figured it all out yet, other than Goldman’s situation must have been pretty grime in order to give up the investment banking model.
grim, not grime
1) Being the biggest Jets fan this was GREAT news!
Lol.
2) Being a Sirius shareholder…I like the sound of that Brandon. I only hope that after the 4Q when the games over…Sirius’s share price is alot higher than it is now. 🙂
No…Goldman Sachs WAS “GRIMEY” alright. Lol. Ask any Sirius shareholder!
Karma baby. Gotta LOVE it.
Hmmm…. “KARMA-Zin!”
Lol.
grimey freudian slip…goldman sure is grimey. lol.
I have a question about “a la carte” radios. Do you think the majority of people who buy them will be “new” subscribers? Because people who are already subscribers may hold off and wait for true “interoperable” radios? I mean “educated” consumers who are already subscribers KNOW that the “a la carte” radios aren’t TRUE interoperable radios….so whats the point of upgrading to “a la carte” radios when they’ll just have to upgrade AGAIN next year when the interoperable radios come out.
Current vehicular XM Subscribers are excited about adding best of SIRI to their current subs for $4 more per month. They want NASCAR, Stern and NFL. They are not hip to the idea of changing out their in-dash oem equipment at all.
Hate the Pats and GS….we shall see what happens….Almost sounds too good to be true
Brandon-
Isn’t it true that both Goldman and Morgan can still do investment banking and keep doing underwriting, but that it it just their capital requirements that will change under their new status? (Don’t, for example, JPMorgan, etc. do that?) Therefore, the amount of leverage they can have will change, and the volume of “deals” will change, but isn’t it feasable that Wienkes and others may very well keep their jobs?
So much for this being good news for Sirius. We’re down nearly 10% already.
But then again down on bad news down on good news is the Sirius mantra we’ve all grown accustom to. Why should today be any different.
Being a Sirius shareholder gives new meaning to the term MASOCHISM.
What can we do at this point but take it? And wait?
Wait and wait and wait and wait and…..WAIT.
CNBC just reported on the 40 billion stock buyback MSFT just did, saying that they still have TONS of cash for acquisitions. They joked that the Yahoo thing didn’t work out, so might as well buy back Billions in shares while they wait to see what other companies they can buy.
And I’m thinking….WHY THE HELL NOT MAKE A BID FOR SIRIUS ALREADY????
What are they waiting for?
Friggin… Tell Microsoft we will take the same deal that Yahoo turned down… $33 a share. There will not be a single no vote.
lol….from your lips to god’s ears!
Goldman Sachs & Morgan Stanley will now rightfully be subject to the same level of OCC (Office of the Comptroller of Currency) scrutiny and micromanagement to which the commercial banks have long been subject.
This change represents a significant releveling of the playing field . . . Adam Smith’s invisible hand at work once again!
FYI . . .
About the OCC
The Office of the Comptroller of the Currency
The Office of the Comptroller of the Currency (OCC) charters, regulates, and supervises all national banks. It also supervises the federal branches and agencies of foreign banks. Headquartered in Washington, D.C., the OCC has four district offices plus an office in London to supervise the international activities of national banks.
The OCC was established in 1863 as a bureau of the U.S. Department of the Treasury. The OCC is headed by the Comptroller , who is appointed by the President, with the advice and consent of the Senate, for a five-year term. The Comptroller also serves as a director of the Federal Deposit Insurance Corporation (FDIC) and a director of the Neighborhood Reinvestment Corporation.
The OCC’s nationwide staff of examiners conducts on-site reviews of national banks and provides sustained supervision of bank operations. The agency issues rules, legal interpretations, and corporate decisions concerning banking, bank investments, bank community development activities, and other aspects of bank operations.
National bank examiners supervise domestic and international activities of national banks and perform corporate analyses. Examiners analyze a bank’s loan and investment portfolios, funds management, capital, earnings, liquidity, sensitivity to market risk, and compliance with consumer banking laws, including the Community Reinvestment Act. They review the bank’s internal controls, internal and external audit, and compliance with law. They also evaluate bank management’s ability to identify and control risk.
In regulating national banks, the OCC has the power to:
Examine the banks.
Approve or deny applications for new charters, branches, capital, or other changes in corporate or banking structure.
Take supervisory actions against banks that do not comply with laws and regulations or that otherwise engage in unsound banking practices. The agency can remove officers and directors, negotiate agreements to change banking practices, and issue cease and desist orders as well as civil money penalties.
Issue rules and regulations governing bank investments, lending, and other practices.
Sirius RK, Thanks for all the info on the OCC above. How does it work if the OCC finds SEC violations or is this not of interest to the OCC.
On a side, I think Adam Smith would find it interesting that this “releveling” of the playing field is not being done in a “free market” motivated by self interest forces, but through government intervention keeping self interest from self destructing.
cos . . . good question on OCC/SEC jurisdictional overlap. I will have to check with one of my banking contacts.
An interesting, though purely academic, aspect of the current “releveling” is that it appeared that “the market” was in fact in the process of self-cleansing . . . first with Bear Stearns, then with Lehman; Merrill saw the handwriting and got out in front with BOA . . . Morgan and Goldman were no doubt next and Morgan was very-very close to a deal with Wachovia.
One could reasonably interpret those events as the market correcting for a lack of proper oversight, the remedy being regulation by the “dreaded” OCC which the investment bankers are loathe to embrace . . . even though they had no problem helping themselves to the heaps of cash being tossed-out the discount window; something had to give.
I believe the “releveling” would probably have occurred with or without govt intervention (hard to believe that Goldman actually traded as low as $85 at one point) but I guess the question is, at what cost to the greater societal good? We will never know.
important p.s.
The “OCC” info above is printed (cut’n paste) directly from the govt’s official website and is not my own text . . .