In one sense not much will change. The firms we regarded as investment banks had already become large financial conglomerates. Morgan Stanley ceased to be a stand-alone investment bank in 1997 when it merged with the consumer finance company Dean Witter. Goldman broadened away from investment banking when it expanded its trading and principal investment activities after it went public in 1999 and by 2007 less than 15 per cent of its pre-tax profits came from investment banking. The truth is that pure investment banks ceased to exist long ago. The absorption of some famous old names into banks and the redefinition of some others will make little difference to client service or market dominance. In respect of their performance as investment banks it is a matter of semantics whether such financial conglomerates include or exclude banking alongside their many other businesses.

The disruption in the market will, however, give an opportunity for other institutions to move into the investment banking space. In recent years there has been a convergence of financial services involving private equity firms, hedge funds and investment banks. Goldman Sachs, with its private equity and hedge fund businesses, is no more an investment bank than Blackstone, with its advisory experts and alternative investment funds, is a buyout firm. The blurring of such distinctions has already led alternative investment firms into investment banking territory. Firms such as Blackstone, KKR and others coming from the hedge fund end of the spectrum will no doubt see further opportunities as the existing investment banks readjust.

Much depends on the regulators' response to the investment banks' problems. The bail-out is so large and public opinion is so inflamed that new rules are inevitable. However, it is unwise to underestimate the industry's powers of survival. The last time Wall Street was in the mire was between 2001 and 2003 when the dotcom bubble burst. President George W. Bush pledged “to end the days of cooking the books, shading the truth and breaking our laws”, but instead a patsy settlement with the investment banks was reached in 2003 that imposed trivial fines and minor rule changes but left their business model intact. What happened then was the industry argued that the investment banks were essential to oiling the wheels of global capitalism. They will be hard-pressed to use such arguments this time round but Washington and Whitehall are still pro-market and the investment banks, whether independent or part of larger financial conglomerates, may yet receive more lenient treatment than seems likely today.