The decision by Morgan Stanley and Goldman Sachs - the last two major US investment banks still on their feet - to become bank holding companies signals the end of high-wire finance on Wall Street.

After a year of turmoil in the financial industry that climaxed last week with bankruptcies and government takeovers, the two companies agreed to submit themselves to far tighter regulations by applying for the new status.

The US central bank late Sunday accepted the two companies' applications, pending a five-day antitrust waiting period.

The approval by the Federal Reserve (the Fed) of their bid ends a 75-year era that began with the Great Depression, when the US government insisted that commercial banks stop taking the devastating risks with their account holders' capital that triggered the economic collapse.

A separate branch of less-regulated investment banking grew out of that move, with five firms - Morgan Stanley, Goldman Sachs, Lehman Brothers, Merrill Lynch and Bear Stearns - dominating the field in the past two decades.

Last week, Lehman Brothers declared bankruptcy and Merrill Lynch was swallowed by Bank of America. Bear Stearns was acquired earlier this year by JP Morgan Chase.

"The decision marks the end of Wall Street as we have known it," William Isaac, a former chairman of the Federal Deposit Insurance Corp, was quoted by Bloomberg financial news agency as saying. "It's too bad."

The Fed, seeking to halt the financial panic that has constricted the flow of private credit, has spearheaded an emergency 700-billion- dollar programme that would mop up the bad mortgage debts that are at the root of the collapse of investment banking. Congress is expected to approve the programme this week.

Under very lax regulations, investment banks boosted their profits to stunning levels in the past two decades by borrowing money and investing in ever more risky investment schemes.

The securitization of mortgage debt along with ever more risky loans to homeowners helped create a housing bubble that has now burst, and millions of homes are under foreclosure and millions of loans have gone unpaid.

In accepting the bid by Morgan Stanley and Goldman Sachs, the Fed said it was motivated by a desire "to provide increased liquidity support to these firms as they transition to managing their funding within a bank holding company structure."

The Federal Reserve Bank of New York, one of the Fed's regional affiliates, will be able to make loans to the US broker-dealer subsidiaries of Goldman Sachs and Morgan Stanley as it does to other commercial banks and bank holding companies.

The loans will use a recently widened spectrum of securities as collateral.

In addition, the Federal Reserve Board also authorized credit to be extended to the London-based broker-dealer subsidiaries of both firms and Merrill Lynch, which was taken over last week in an emergency sale to Bank of America.