The investment bank, which created unprecedented wealth in the last two decades and helped make the United States the world's financial capital, died at home in New York on Sunday night from injuries sustained in the credit crunch. It was 75 years old.
The decisions by Goldman Sachs and Morgan Stanley to convert to bank holding companies, regulated by the Federal Reserve instead of the Securities and Exchange Commission, is indeed an epochal moment.

It is the final nail in the coffin of the Glass-Steagall Act, the 1933 law that split investment banks from commercial banks. And it is a sign that the price of federal help in navigating through the credit storm will be increased regulation.

More important, it means that the Wall Street as a huge financial casino, where brash cowboys place outsize bets in the hopes of rich year-end bonuses, is over. No more big, swinging you-know-what. Banking will become more conservative.

"The last two big investment banks have traded in their Ferrari-like business models to become Buick-like bank holding companies," says Jeffrey Goldfarb on Breakingviews.com.

Goldman and Morgan Stanley were the last independent investment banks left after the collapses of Bear Stearns and Lehman Brothers and the sale of Merrill Lynch.

The firms took the proactive steps themselves, the New York Times reports, even as the Bush administration and congressional leaders are in a negotiations over a $700 billion bailout plan for troubled financial assets.

Becoming a bank holding company will mean that both firms will need to sharply reduce their leverage, or debt, to come under regulatory compliance. The firms have already started that process, but a further throttling down will be needed. Morgan Stanley has $1 of capital for nearly every $30; Bank of America's ratio is less than 1 for 11.

And while that may mean greater stability, it will also mean smaller profits in the future.

The firms will also be able to take deposits and tap the Fed's credit facility. They will also be able to change the accounting on some of their assets, being able to hold them to maturity instead of marking to the current market value.

"While accelerated by market sentiment, our decision to be regulated by the Federal Reserve is based on the recognition that such regulation provides its members with full prudential supervision and access to permanent liquidity and funding," said Lloyd Blankfein, chief executive of Goldman Sachs. "We believe that Goldman Sachs, under Federal Reserve supervision, will be regarded as an even more secure institution with an exceptionally clean balance sheet and a greater diversity of funding sources."

Morgan Stanley, meanwhile, has also reached a deal with Mitsubishi UFJ Financial Group that will allow the bank, Japan's biggest, to buy as much as 20 percent of the firm. That, and the move to bank-holding status, certainly renders the recent merger talks with Wachovia Bank moot. As part of its transition, its Utah industrial bank will be converted into a national bank. 

What comes next? The trick for the two firms will be preserving what they do best while doing the opposite: becoming more bureaucratic and more averse to risk.

That won't be easy. And it leaves many opportunities on the table for hedge funds, which don't have those restraints, assuming that they can avoid the regulatory hot light in the coming months.