In an unprecedented move, Morgan Stanley and Goldman Sachs Group Inc. have converted from stand-alone investment banks into bank holding companies, CNNMoney.com reported.

The transition took place last night and brings a close to the era of the traditional Wall Street investment bank.

“The separation of investment banking and commercial banking has come to an end,” said Bert Ely, an independent banking consultant.

With approval from the Federal Reserve, Morgan Stanley and Goldman Sachs will be able to acquire retail banks and streamline their borrowing from the Fed. It is expected that both companies will quickly boost their existing retail bank services, which will provide access to more stable sources of funding – customer deposits.

Currently, Morgan Stanley has $36 billion in deposits and it has been rumored that the company is looking at a partnership with troubled Wachovia Corp. Goldman Sachs has fewer deposits — $20 billion – and said it plans to transition into its new role through acquisitions and through internally growing its deposit base.

“The new bank holding structure will ensure that Morgan Stanley is in the strongest possible position,” said John Mack, CEO of Morgan Stanley. “It also offers the marketplace certainty about the strength of our financial position and our access to funding.”

Both companies are under close supervision of the Fed, as the government agency now has direct regulatory oversight of both companies. Previously, they were under primary regulation of the Securities and Exchange Commission.

“We believe that Goldman Sachs, under Federal Reserve supervision, will be regarded as an even more secure institution with an exceptionally clean balance sheet and a greater diversity of funding sources,” said Lloyd Blankfein, CEO of Goldman Sachs.