THE HONOUR of ringing the opening bell at the New York Stock Exchange fell yesterday to Sheikh Nasser Al-Mohammad Al-Ahmad Al-Sabah, prime minister of Kuwait.

It has long been a tradition for visiting notables to open the daily session on the 105-year-old trading floor, but seldom has the market seen such sustained turbulence.

It was no different yesterday, as investors in full-blown crisis mode took account of news overnight that investment banks Goldman Sachs and Morgan Stanley, the premier institutions on Wall Street, were to transform themselves into bank holding companies.

Stocks fell as the prime minister was introduced to traders gathered around banks of data screens, which for weeks have reflected the disorder and fright that has taken hold of the markets.

The stocks were still falling as, official duties done, the sheikh's nine-car motorcade sped off into the sunbaked streets.

Although a tidal wave of turmoil has turned the financial world upside down, the surrender of Goldman and Morgan Stanley marked the moment when the biggest boys on the Street conceded that they could no longer stand aloof from the disruption.

Now they will be able to take deposits or acquire deposit-takers, shoring up their balance sheets and reducing their dependence on shaky credit markets.

But the new flexibility has a flip-side. Goldman and Morgan Stanley will henceforth be regulated by the US Federal Reserve - and new capital requirements will curtail their ability to make profits.

In a further development, Morgan Stanley revealed plans to sell as much as a 20 per cent stake for $8.4 billion (€5.67 billion) to Mitsubishi UFJ Financial Group, Japan's biggest bank.

Not so long ago, Goldman and Morgan Stanley led an elite club that included Merrill Lynch, Lehman Brothers and Bear Stearns.

The fateful tide that led those banks to bankruptcy or firesale meant that reports on the change of suit at Goldman and Morgan Stanley invariably described them as the "last surviving" independent investment banks on Wall Street. That it has come to that in such short order seems extraordinary.

"It's the last thing that anyone would have expected . . . I think it's probably the most momentous time in American banking since 1933," Wall Street historian Dr Charles Geisst told The Irish Times.

Dr Geisst, a professor of finance at Manhattan College, said one possible explanation for the decision to change the status of the two banks so quickly was that they may have been facing an outright takeover by a non-US institution.

"By requesting to become commercial banks, they are putting themselves under the Fed's regulation. If they [are] banks, it would be very difficult for a foreign bank to buy them," Dr Geisst said.

He added: "I don't think that we're anywhere near the end of this process. I think it's only the beginning."

If the Bush administration's plan to buy $700 billion of toxic mortgage assets from vulnerable banks represents the most significant effort yet to come to grips with the crisis, the reopening of the market yesterday morning passed without agreement between the US government and Democrats on the parameters of the package.

With Democrats rigidly holding the line on the need for greater congressional oversight of the plan and assistance for homeowners in trouble with mortgage lenders, US president George W Bush implored them yesterday to resist the urge "to insist on provisions that would undermine the effectiveness of the plan".

As efforts intensified to seal a deal in time for a vote this week in Congress, it was the president's second public avowal of the emergency initiative in three days.

If that is in keeping with concern in the markets that the unrelenting volatility could bring more institutions to heel in the absence of decisive action, a statement from G7 finance ministers and central banks lauded the US plan and hinted at more to come from the international authorities.

"We are ready to take whatever actions may be necessary, individually and collectively, to ensure the stability of the international financial system," the statement said.

"The world puts its stock in us," reads the marketing legend of the New York Stock Exchange.

As the convulsions continue, the pressure is on to regain confidence in the financial system.