Goldman and Morgan decide investment banks are so five minutes ago

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Wow! Goldman Sachs and Morgan Stanley have asked the Federal Reserve to become bank holding companies, and the Fed–which just so happens to regulate bank holding companies–has said ‘come on down’. We’ll be learning over the next few weeks what exactly this means, but I have a few off-the-top-of-the-head thoughts.

1) Goldman and Morgan are never again going to be allowed to be as leveraged as they’ve been over the past decade or so, which means they’re never again going to be as profitable as they’ve been over the past decade or so.

2) The SEC, which up to now was responsible for overseeing the two companies, is toast. Well, maybe not toast, but headed in the direction (already suggested by Hank Paulson) of becoming purely a consumer and investor protection agency.

3) High-end Manhattan real estate prices will continue to trend downward.