Just 24 months ago, the financial world was in deep crisis brought to the brink by "casino banking". Two Wall Street broker-dealing houses which survived the Great Depression vanished.
Bear Stearns was bought by JP Morgan for a song and Lehman Brothers collapsed and was bought out of receivership by Barclays Capital.
Switzerland's UBS was badly holed and the Royal Bank of Scotland - with a large investment banking arm - ended up 84 per cent owned by the British government.
The recovery of the sector in 2009 looked to have been remarkable.
Surviving houses like Goldman Sachs, Morgan Stanley and BarCap quickly returning to profits and the much denigrated bonus culture returned. The threats by policymakers to clamp down on bonuses, strengthen capital requirements and toughen regulation appeared to make no difference at all. The "masters of the universe" looked to be back.
The profits of 2009 may well turn out to be freakish - a product of short-term factors
A return to profit was probably necessary to stabilise the financial system. But it was largely achieved in a false market place. The elimination of much of the competition allowed the surviving banks, with sufficient capital, to grab a bigger share of the market and raise charges for basic services. At the same time, a combination of artificially low interest rates and quantitative easing (printing money) on both sides of the Atlantic allowed banks to improve margins by borrowing cheaply and lending at higher rates.
The profits renaissance has done nothing, however, to repair the confidence of the sector. Goldman Sachs has suffered enormous reputational damage. It has been the subject of a Securities Exchange Commission fraud charge (later reduced), humiliation before Congress, a £17m fine from the Financial Services Authority and almost routine denigration in the financial media. A firm once renowned for being smarter than everyone else is regarded as too smart by half.
One symbol of the reputational crumble was the decision of the Simon Dingemans, the London-partner in charge of mergers and acquisitions, to jump ship and join GlaxoSmithKine as chief financial officer with a big salary cut. Working within a FTSE100 company - albeit one with huge global reach -- suddenly looks more enticing than investment banking.
The loss of status for investment banking does not appear to have deterred the Barclays board. The choice of BarCap president Bob Diamond to take over from the patrician chief executive John Varley (with a family connection dating back to the foundation of the bank in the 19th century) has proved divisive. Diamond's claim to run Barclays is strong.
He has built BarCap into a powerhouse and his part of the bank produced 90 per cent of the income in the last financial year.
But there is nothing in Diamond's record to suggest he cares a jot about the retail/utility bank, which is the bedrock of Barclays. In a message to staff, on his appointment, he barely mentioned personal customers, placing all the emphasis on building wealth management and the corporate bank.
The leadership of his predecessor Varley always has been about preserving the old Barclays. It is no accident that among the deal he is most proud of was the purchase of South Africa's biggest retail lender Absa in 2005.
Barclays, the leading bank in South Africa in colonial times, had been forced out in the 1980s under pressure from the anti-apartheid movement and UN sanctions.
There have been suggestions that the board's choice of Diamond could be in preparation for the break-up of the bank into an investment/corporate banking unit and a retail and international bank. A Banking Commission, headed by former Office of Fair Trading chief Sir John Vickers, is currently investigating the case for breaking up the big banks into merchant and utility banking units. The main political force behind the proposal is the Business Secretary Vince Cable and the make-up of the Commission has given hope to smaller bank advocates.
Among its members is former Barclays chief executive Martin Taylor, who was forced out of his job after BarCap's predecessor, BZW, almost brought the whole bank down after foolish investments in the failed hedge fund Long Term Capital Management and Russian bonds. Another member of the group, Martin Wolf, the respected Financial Times columnist, has in the past been critical of the role of casino banking in the financial crisis.
Clearly, there will always be a role for investment banking. The services they provide, from currency trading and hedging to stockbroking and debt management, are core to corporate activity and commerce. But what is also plain is that the wilder excesses of the "noughties" - the creation of exotic financial instruments based on sub-prime mortgages and other debts - is no longer regarded as acceptable.
The super-normal profits of 2009 may well turn out to be freakish - a product of short-term factors. The casino banks themselves seem to realise this and it has been a period of unusual introspection for firms like Goldman Sachs.
A combination of rules, regulation, taxes and reputational risk may well put grit in the wheels of investment banking in the coming years.
