Investment banks went off track and will have to reinvent themselves. But investment banking is an invaluable part of the financial system. The traditional work of investment banks, such as advising on mergers and acquisitions, underwriting IPOs, equity trading and asset management will continue according to an article in Investor’s Business Daily.
Only two big independent players are left, and the survivors – Goldman Sachs and Morgan Stanley – have converted to bank holding companies. Both firms are dialing back on their riskier operations and as commercial banks, they will face far more supervision from the Federal Reserve and greater restrictions in investing.
But many of the same familiar names will continue to dominate the world of investment banking, even if it’s the remnants of Bear Stearns operating within JPMorgan’s brokerage unit, or Merrill Lynch, performing the same function within Bank of America. “M&A is still a business where the current market leaders will control market share regardless of what corporate umbrella they’re under or how they’re structured,” says Brad Hintz, an analyst at Sanford Bernstein. “IPOs are still a business of market share and reputations, so IPOs will go to the same IPO houses.”