The world is changing: investment banks are no more…

The recent developments in the financial world are forcing vast changes to the economic climate and the markets are desperately trying to right themselves amidst the evolution many banking sectors are experiencing. In one week the era of the independent investment bank has ended, deeply changing the worldwide financial landscape.

‘Wall Street as we’ve known it for decades has ceased to exist’, explains The Wall Street Journal, though the gravity of such a change is of course affecting London: six months ago there were five major investment banks, now a portion of the market has vanished overnight; Lehman Brothers and Bear Stearns have collapsed, Merrill Lynch is getting bought out by the Bank of America, and Morgan Stanley and Goldman Sachs are becoming commercial banks.

Two banking giants filing for bankruptcy is a clear sign of a problem with the system, and now the survivors have to arrange their affairs to conform to the capital requirements and other rules that govern such commercial banks.

Perhaps this is one of the greatest tests to the global economy in decades: and a strong example of rules required. Lax regulations have allowed investment banks to boost their profits for almost twenty years by borrowing money and investing in ever more risky schemes. And now they are paying the price.

What will happen now? Can we be sure that the worldwide economic machine is correcting itself against the greed of man?