How Wall Street was shrunk

The biggest casualties of the global credit crisis so far have been the big, independent investment banks who have either gone bankrupt or converted themselves into traditional banks. Is this the end of Wall Street as we know it? By Vivek Sharma

As recently as January this year, the list of top five independent investment banks read Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman Brothers and Bear Stearns. Nine months later, the list has been completely transformed with the top banks now being Raymond James, Jefferies & Co, Greenhill & Co, Keefe Bruyette & Woods and Piper Jaffray.

It is just fine if you haven't heard these names before. Not many outside Wall Street know them!

It is not just the names that have changed; the average size of top investment banks has also shrunk dramatically. At the beginning of this year, the top five banks had a combined market value of around $250 billion with the top firm, Goldman Sachs, valued at nearly $90 billion.

The combined market value of the top five firms in the new list has shrunk by a factor of 20, to just around $12 billion.

Over the last three quarters, top firms in the investment banking industry have been transformed beyond recognition. Bear Stearns was the first to go, saved from the brink of bankruptcy and acquired for a pittance by JP Morgan (See:US Fed clears JP Morgan's acquisition of Bear Stearns bank)

Lehman Brothers went bankrupt and its various businesses across the globe are slowly being sold to firms like European bank Barclays and Nomura Securities of Japan (Nomura to buy Lehman's banking, equities units in Europe, Middle East).Merrill Lynch rushed into the arms of Bank of America and saved itself from total collapse ( Bank of America buys Merrill Lynch)