Rewind backward by just a couple of years and take a look at the investment banking industry on Wall Street. Everything was humming along quite brilliantly with no apparent signs of distress. There were at least five major players in the investment banking industry at that time: Goldman Sachs, Morgan Stanley, Lehman Brothers, Bear Stearns, and Merrill Lynch. All five of these companies were bringing in record profits and their stocks were sitting at all time highs.

Now take a look at where things stand today in September of the year 2008. Three of the five major investment banks are no longer being run independently and the other two are now facing questions as to whether they can continue on their own.

Back in March Bear Stearns became the first victim of the credit crisis in the investment banking industry. At that time it was the Federal Government as well as JP Morgan Chase that stepped in to bail out the company and avoid what it thought could be a financial disaster that could spread throughout the system. At the time the market saw this as a major positive because it meant that the government was not going to allow such a massive financial company to collapse. As the months moved forward Lehman Brothers started to get more and more questions about their balance sheet and the solvency of the company. As has been the case with all of the other investment banks, the company reassured investors numerous times that they would be fine. On Monday they filed for chapter eleven bankruptcy. Merrill Lynch was also asked questions about their ability to continue on as an independent company given their exposure to risky assets and the credit crisis. CEO John Thain assured the street that the company had been shoring up its balance sheet and there was no need to worry. Late Monday came word that Merrill Lynch had negotiated itself into being bought out by Bank of America. Clearly Merrill had come to the understanding that it wouldn't have been able to make it on its own.

What are investors supposed to think of all of this? Time and time again the leaders of invest bank leaders have reassured investors that things are fine, when they really aren't. Were the leaders lying or did they not really understand how dire the situation was? What will become of the last two investment banks standing in the industry? Now there is more pressure than ever on both Morgan Stanley and Goldman Sachs to prove that they can make it. The rumors are out there that both Morgan and Goldman will need to merge with a commercial bank to keep going because of their very highly leveraged portfolios. Both Morgan and Goldman have proven to be the standouts in the industry in the past, but now it seems the question has become, will this industry even make it through this amazingly difficult period?

The fall of the investment banking industry can be tied directly to their highly leveraged portfolios that worked so well for so long, but have let them down so badly in the end. After all, high risk can bring high rewards, but it still equals high risk.