The End of the Masters of the Universe?

We should also care because a thriving economy is based on the proper functioning of the global capital markets. All of those now-crippled debt and equity underwritings raise trillions of dollars in capital each year that companies use, in part, to buy new plants and equipment, take chances on new technologies such as wind power or hydrogen cars, and create new and intellectually engaging jobs. Without capital to grease the gears, our economy will sputter to a halt.

Furthermore, even the much-maligned subprime mortgage did make homeownership possible for millions of Americans. Most of the new homeowners with these mortgages -- some say as many as 75 percent or more -- make their payments on time. But the bad apples and crashing home values have done in this particular corner of financial innovation for the foreseeable future. And we may not be better off as a result.

Marry all of this -- the coming new regulatory regime, the persistent question of whether securities firms can fund themselves without customer checking and savings accounts, and the moribund markets for mergers and acquisitions, debt and equity underwriting and, of course, asset-backed securities -- and it's clear that a brave new world of investment banking is here. And it isn't pretty.

The short-term fixes are few and far between: Securities firms can try to sell themselves to banks, but since J.P. Morgan can't buy everyone, that's a long shot at best. Wall Street can aggressively lengthen the maturity of its borrowing and remove the voting power of the overnight lenders who helped finish off Bear Stearns. While this will increase the cost of capital, a more modest profit profile is better than none at all. Or securities firms can start doing whatever Goldman Sachs is doing, since it alone seems to be weathering the crisis.

Then there's just old-fashioned ingenuity. Wall Street may be suffering one of its worst financial disruptions in generations and its outlook may be bleak, but "smart people will always find a way to make money," says Schwarzman. For the sake of our way of life, let's hope he's right.

wdcohan@yahoo.com

William Cohan, the author of "The Last Tycoons: The Secret History of Lazard Frères & Co.," is writing a book about the collapse of Bear Stearns.