The move is a gigantic reversal from the trend over the last decade to merge all units of banking under one roof, as allowed by the repeal of the Glass-Steagall Act in 1999.
The brokerage consolidation may be part of a plan by Citigroup to split itself in two, as the company faces staggering losses in the financial meltdown that warranted a government bailout that totals hundreds of billions of dollars.
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The boards of both banks--Citigroup and Morgan Stanley--have agreed to the brokerage merger, according to CNBC. Citigroup would assume 51% financial control of the created operation.
Citigroup was formed in 1998 as part of a wave of massive consolidation of financial institutions. Smith Barney was the brokerage arm of the money juggernaut, which was the largest desk on Wall Street.