Back in 2008, as the Crash was unfolding, investment banks like Morgan Stanley and Goldman Sachs were invited by the government to become regular “banks” by opening a “banking” affiliate. This gave them access to unlimited billions of dollars they could borrow from the Federal Reserve, which was busily “printing” the money to be borrowed.
This access to the Fed was infinitely more important than the TARP funds these firms got directly from the Federal budget. And this access continues to this day.
It won’t come as a surprise, will it, that Morgan Stanley is now trying to get as much of its derivative exposure as it can into the federally protected “bank” or that the government appears willing to let this happen?