A cure for Wall Street?

Financial Times

The world has not ended. The international economy has not yet collapsed. But one thing is now quite clear: the banking system as we know it has failed. …[T]hree of Wall Street’s five big independent investment banks have disappeared inside six months. After an astonishing weekend it is too early to predict the future shape of investment banking with confidence, but business as usual is not one of the possibilities.

… Yet panic would be too strong a word to describe this – the US authorities will be hoping that it is the return of realism. … From poor  governance to flawed incentives, incompetent risk management to foolish strategies, the failures of the financial system have been so widespread as to render a coherent regulatory riposte impossible. The likely outcome is that tight capital requirements will be forced to serve as a catch-all response to risk. If so, the banking system will look more like that of the 1960s — a low-risk, low-return utility business.