Updated from Sunday, Sept. 21

The Federal Reserve's announcement late Sunday that Morgan Stanley and Goldman Sachs would transform themselves from investment banks into traditional bank holding companies likely puts an end to a merger deal between Morgan and Wachovia, at least for now, according to a media report.

An executive close to Morgan says there "won't be a Wachovia deal tomorrow, and probably ever," CNBC reports on its Web site.

Morgan Stanley

(MS) - Get Report

and

Wachovia

(WB) - Get Report

were "deep in discussion" about a merger Sunday, according to a report in

The Wall Street Journal

.

Morgan Stanley is also discussing selling a substantial stake in a combined company with Wachovia to the Chinese government's China Investment Corp., the report added.

By becoming bank holding companies, Morgan Stanley and Goldman will come under the scrutiny of national banking regulators and will be subject to new capital requirements.

Shares of Morgan Stanley ended Friday up $4.66 at $27.21, while shares of Wachovia finished the session up $4.25 at $18.75.

This article was written by a staff member of TheStreet.com.