The return of investment banking?
Bloomberg reports that Goldman Sachs, Morgan Stanley and JP Morgan Chase are set to repay TARP funds:
May 19 (Bloomberg) — Goldman Sachs Group Inc., JPMorgan Chase & Co. and Morgan Stanley applied to refund a combined $45 billion of government funds, people familiar with the matter said, a step that would mark the biggest reimbursement to taxpayers since the program began in October.
The three New York-based banks need approval from the Federal Reserve, their primary supervisor, to return the money, according to the people, who requested anonymity because the application process isn’t public. Spokesmen for the three banks declined to comment, as did Calvin Mitchell, a spokesman for the Federal Reserve Bank of New York.
Readers may recall (this blog wasn’t around then) that it wasn’t too long ago (22nd Sept 2008, to be exact) that Goldman and Morgan Stanley filed to downgrade their status from investment banks to traditional bank holding companies:
The agreement follows swift on the heels of the announcement that Morgan Stanley and Goldman Sachs, the last two investment banks left standing, will become traditional bank holding companies, marking the end of an era for Wall Street.
The Federal Reserve’s surprise announcement, which came at 2.30am London time, places the banks under the supervision the bank regulators and gives them easier access to credit to help them ride out the financial crisis.
The move spells the end of Wall Street as it has existed until now – a group of lightly regulated investment banks.
Investor confidence appear to be ticking upward in their favour as well:
Goldman Sachs, whose stock closed today at $143.15 in New York Stock Exchange composite trading, is up 61 percent. Morgan Stanley, which closed today at $28.28, has almost tripled from $9.68.
JPMorgan shares, by contrast, are 11 percent lower at today’s $37.26 closing price than they were on Oct. 10, when they closed at $41.64.
WSJ’s Deal Journal yesterday lauded JP Morgan as the “best investment bank in the world”:
As the securities industry faces the prospect of years of austerity after a decade of excess, there are early signs the baton has been passed from Goldman Sachs Group to J.P. Morgan as the best investment bank in the world.
And Citi’s analysts yesterday graded Goldman Sachs as a “Buy”.
Update: This may explain why banks are so eager to repay TARP money.