Citi, Morgan Stanley Merge Brokerages
By Harry Kimball,  Newser Staff
Posted Jan 13, 2009 5:32 PM CST
Graphic compares Citigroup and Morgan-Stanley.   (AP Photo)
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(Newser) – Rumors of Citigroup’s plan to merge its brokerage unit with that of Morgan Stanley have proven true, as both companies’ boards approved the move today, CNBC reports. Morgan Stanley will control 51% of the joint venture between its operation and Citi’s Smith Barney. Observers see Stanley’s option to increase its stake later as a sign that Citi will eventually leave the brokerage business entirely.

The merger occurs as the government presses Citigroup to abandon its “financial supermarket model,” where the bank provides soup-to-nuts services to clients. Most of the banks flailing in the financial crisis operated under this model; Citi itself owes the government $45 billion. Today's deal creates the world's largest brokerage firm, with about 20,000 advisers.