The Federal Reserve said Sunday night, a move that fundamentally reshapes an era of high finance that defined the modern Gilded Age.

It also is a turning point for the high-rolling culture of Wall Street, with its seven-figure bonuses and lavish perks for even midlevel executives. It effectively returns Wall Street to the way it was structured before Congress passed a law during the Great Depression separating investment banking from commercial banking, known as the Glass-Steagall Act.

The firms requested the change themselves, even as Congress and the Bush administration rushed to pass a $700 billion rescue of financial firms. It was a blunt acknowledgment that their model of finance and investing had become too risky and that they needed the cushion of bank deposits that had kept big commercial banks like Bank of America and JPMorgan Chase relatively safe amid the recent turmoil.

By becoming bank holding companies, the firms are agreeing to significantly tighter regulations and much closer supervision by bank examiners from several government agencies rather than only the Securities and Exchange Commission. Now, the firms will look more like commercial banks, with more disclosure, higher capital reserves and less risk-taking.

It also marks a turning point for the high-rolling culture of Wall Street, with its seven-figure bonuses and lavish perks for even midlevel executives. It effectively returns Wall Street to the way it was structured before Congress passed a law during the Great Depression separating investment banking from commercial banking, known as Glass-Steagall.

For decades, firms like Morgan Stanley and Goldman Sachs thrived by taking bold bets with their own money, often using enormous amounts of debt to increase their profits, with little outside oversight.

By becoming bank holding companies, the firms are agreeing to significantly tighter regulations and much closer supervision by bank examiners. Now, the firms will look more like commercial banks, with more disclosure, higher capital reserves and less risk-taking.

They were the envy of Wall Street, dominating the industry’s most lucrative businesses, landing headline-grabbing deals and advising companies and governments around the world on mergers, stock offerings and restructurings.

For decades firms like Morgan Stanley and Goldman Sachs thrived by taking bold bets, often using enormous amounts of debt to juice their profits, with little outside oversight.

But that brash model was torn apart over the last several weeks as investors lost confidence in the way they made those bets during the recent credit boom, when investment banks expanded with aplomb into esoteric securities, the risks of which were not easily understood.

Over last year, clients started pulling their money, share prices plunged and these banks’ entire enterprises were brought to the brink.

In exchange for subjecting themselves to more regulation, the companies will have access to the full array of the Federal Reserve’s lending facilities. It should help them avoid the fate of Lehman Brothers, which filed for bankruptcy last week, and Bear Stearns and Merrill Lynch — both of which agreed to be acquired by big bank holding companies.

In recent days, Morgan Stanley had sought other ways to bolster its capital, and had been in advanced talks with China's sovereign wealth fund and others about raising billions of dollars, people briefed on the matter said Sunday night. It had also been talking about a merger with Wachovia, a large commercial bank based in Charlotte, North Carolina.

With their transition to operating as bank holding companies, those talks are likely to take a different form, because now Morgan can buy a commercial bank.

The decision also raises questions about whether the Federal Reserve will seek to regulate hedge funds, many of the largest of which closely resemble investment banks like Goldman. To many that is a good move too to stop organizations being after for short term gains and make them more accountable for long term stability of the ecosystem.