Investment banks convert as bailout debate begins

Goldman Sachs and Morgan Stanley sought shelter with the Federal Reserve to survive a financial storm that destroyed their rivals as Wall Street braced for a week of political wrangling over a proposed $700 bln bailout for troubled banks.
Morgan Stanley went a step further and struck a deal with Japan's largest bank, Mitsubishi UFJ Financial Group. MUFJ agreed to buy up to a 20% stake, sending Morgan Stanley shares up 12% in pre-market trading.
The Fed's agreement to convert the once high-flying investment banks into more conventional depositary institutions was Washington's latest effort to restore calm to chaotic markets. It followed frantic talks between the Bush administration and Congress to prevent the crisis from pushing the economy into severe recession.
By agreeing to much tighter Fed regulation as bank holding companies, Goldman Sachs Group Inc and Morgan Stanley moved to avoid the fate of rivals that either collapsed or were taken over in the worst financial crisis to sweep Wall Street since the Great Depression.
U.S. stock futures were indicating a lower opening on Wall Street, while European stocks edged higher, the dollar fell and U.S. Treasury debt prices edged up as investors played it safe before the mechanics of the bailout plan are worked out.
"We need to see more details from the rescue package. What is missing is the price the U.S. authorities are going to pay for the toxic assets," said Heino Ruland, analyst at FrankfurtFinanz.
Goldman shares were down about 1% in early electronic trading, while Morgan Stanley shares were little changed.
Markets elsewhere in the world were helped as a movement to curtail short selling gathered force: the Netherlands, Taiwan and Australia all announced various forms of curbs over the weekend.
The rescue was cobbled together late in a week of seismic shifts on Wall Street that saw Lehman Brothers Holdings Inc file for bankruptcy, Merrill Lynch & Co Inc agree to sell itself to Bank of America Corp, and the Fed stage an $85 bln rescue for insurer American International Group Inc.