The Almost Disappearance of Goldman

We learn in the WSJ today that back in September, Goldman approached Citigroup about a possible merger.  The call apparently came shortly after Lehman filed for bankruptcy.  Nothing apparently came of the effort. 

In some respects, Goldman, as an indepedent investment banking firm, has already disappeared.  It converted to a commercial bank, recently announcing that it would seek a bank charter from the state of New York.  With the conversion comes supervision by banking regulators and access to cash from the federal reserve.  They remain, however, disadvantaged.  They lack the retail network needed to access deposits, a cheap source of funding. 

The merger talks illustrate, therefore, that the disappearing act could go even further.  Goldman and Morgan Stanely remain the last of the investment banking firms to survive as free standing entities.  It is probably only a question of time before they merge with or become susidiaries of the large commercial banks.