In late September we witnessed the once-upon-a-time worldâ€™s top investment banks, and the only two survivors of the investment bank massacre, Goldman Sachs and Morgan Stanley applying for a changes in status! Quite an irony this is, if one considers the â€œstatusâ€ they enjoyed for so long being investment bankers or smutty traders.
Now, the day has come that other troubled companies also saw reason and ask to be baptised â€œbank holding companyâ€. Itâ€™s like I can hear them screaming â€œPlease save us- save us â€“ not them- us-why them- and not us â€“ Pleeeeease save us!â€. GMAC LLC, General Motorâ€™s car dealersâ€™ largest lender has asked for permission to be treated as a bank holding company so it can get access to the Treasuryâ€™s big fat pot of $700 billion â€“I have to say this pot sounds empty already to me.
The lender is also trying to swap debt and raise cash as quickly as possible by disposing a business unit earlier this month. The lender is looking to avoid a possible cash squeeze by agreeing to sell another two insurance units in due course.
The Treasuryâ€™s $700 billion rescue fund announced in October and set to revive the financial industry, includes $125billion that were originally supposed to provide relief to smaller regional lenders. In the next few weeks, we will definitely see more insurers, lenders and other finance companies converting into banks to become eligible to join the scheme.