The recent financial crisis and falling of investment bank giants, Bear Stearns and Lehman Brothers is rapidly changing the landscape of America’s financial world and Wall Street as we know it.
In a blink of an eye, the surviving investment banks such as Morgan Stanley and Goldman Sachs have reorganised themselves into the safe haven of commercial banking.
And so, in a single week, the era of the independent investment bank has ended. Wall Street as we’ve known it for decades has ceased to exist. Six months ago there were five major investment banks. Two — Lehman Brothers and Bear Stearns — have failed, Merrill Lynch is selling itself to Bank of America, and now the last two are becoming commercial banks.
That will mean less leverage — assets that are perhaps 10 times their capital bases instead of the 20 or 30 to 1 they have sported as investment banks. That in turn means less risk and almost certainly less profit and lower compensation. (source)
What will this mean for the average consumer?
There probably wouldn’t be much change as the average consumer is not in the same position to place large deposit investments with these investment banks to begin with. Needless to say, it is an interesting observation of a wave of change sweeping through Wall Street and it will be interesting to see if this might be the end of creative investment banking and financial innovations.
