<p>^^^ errr that’s not exactly correct.</p>
<p>Investment banks operate (or at least when they existed) operated under very different rules than deposit banks. The regulations (such as capital adequacy ratios, rules concerning deposits, etc.) are widely different. </p>
<p>Further, banks do not engage in riskier businesses that many i-banks engaged in – take for instance the huge leveraged bets that Lehman took with regards to the subprime market or other forms of leverage that i-banks routinely took in engaging in other businesses.</p>
<p>Equity Research? Please, this is absolutely a money losing cost center.</p>
<p>And don’t fool yourself into thinking that investment banking businesses will continue in its current form… far from it. For instance, one of the traditional profit centers for i-banks were prop trading desks. Those will be largely scaled down or shut down altogether (as was the case when big money center banks took over i-banks such as when Citigroup took over Solly or when Credit Suisse took over First Boston or when BofA takes over Merrill). </p>
<p>The appetite for risk is over in this era. The rules won’t let them. That’s what Goldman and Morgan decided (or more to the point what the market and their respective shareholders decided when they voted with their feet) when they signed on the dotted line. In order to survive, its now all about having enough liquidity and a strong balance sheet to weather the storm. Cash is King… As Gordon Gekko said, "“The key is capital reserves; without it you can’t pi$$ in the tall weeds with the big dogs”</p>
<p>The game is over… for now anyway. When this current storm passes and the dust has settled and the public furor over what will be a huge financial and political football that is this current bailout has passed (i.e. a decade + from now) perhaps when the pendulum has swung the other way the investment banking industry may make a come back… but I wouldn’t bet on it.</p>