The Federal Reserves announced Sunday night that applications by Goldman Sachs and Morgan Stanley to become bank holding companies were approved.

The approval is still subject to a five-day anti-trust waiting period.

The Fed said the decision was made to "provide increase liquidity support" to these institutions as they "transition to managing their funding."

The release said the Federal Reserve bank of New York may "extend credit to the U.S. broker-dealer subsidiaries of Goldman Sachs and Morgan Stanley against all types of collateral that may be pledged at the Federal Reserve's primary credit facility for depository institutions or at the existing Primary Dealer Credit Facility (PDCF)."

These arrangements have also been made available to subsidiaries of Merrill Lynch, as well as London-based branches of Goldman Sachs, Morgan Stanley and Merrill Lynch.

By Megan Ainscow
©CEP News Ltd. 2008