Recently minted commercial bank Goldman Sachs Inc. has applied for a New York state banking charter, state officials said Monday.
Governor David Patterson praised the decision, calling Goldman Sachs the "bedrock" of New York's financial community and that it reflects the state's ability to "effectively regulate" banks.
"We look forward to working with [Goldman Sachs] as they transition a substantial portion of their business from an investment bank to a new regulatory scheme," Patterson said in a statement.
Goldman Sachs (GS, Fortune 500) and fellow brokerage Morgan Stanley (MS, Fortune 500) were the last remaining investment banks on Wall Street before federal officials granted the firms' requests to become bank holding companies last month.
The decision to become commercial banks came as rival brokerages Bear Stearns and Lehman Brother collapsed in the fallout of the nation's credit crisis.
As commercial banks, Goldman and Morgan have the ability to purchase other retail banks, which could give them a more steady foundation of cash. It also gives them access to loans from the Federal Reserve that were not available to brokerages.
But it also puts Goldman and Morgan under the Fed's supervision, increasing the agency's regulatory oversight and possibly forcing them to raise additional capital. As banks, Morgan and Goldman will be forced to take less risk, which will mean fewer profits.
A call to Goldman Sachs requesting comment was not immediately returned Monday.
The decision to apply for a New York state charter will not preclude Goldman from expanding its business or opening branches outside of the state, according to Bert Ely, principal of Ely & Co., a financial institutions and monetary policy consulting firm in Virginia.
"Banks can have multiple charters," Ely said. Having a New York charter "does not bar them from having other charters," he added.
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