GUEST COMMENT: The good old days will return

There is very little that passes for good news on Wall Street these days: Jobs are being shredded left and right, bonuses are miniscule for those bankers and traders that remain and fear seems to be the most prevalent emotion. On top of all this, there is just not a whole lot to do.

But for those who can survive in this exceedingly hostile environment, my gut tells me the rewards will one day - perhaps not soon, but one day - be substantial.

One thing that has become abundantly clear since the onset of the financial crisis in June 2007, is the irony that the demand for what Wall Street does best - allocate capital quickly and efficiently wherever it is most needed around the globe - has grown stronger and stronger at the very moment Wall Street no longer feels comfortable providing it.

Not even the infusion of billions of dollars of new capital from the U.S. government - as part of the Troubled Asset Relief Program - has convinced banks to return to their normal lending practices. And the markets for underwritten offerings - high-yield debt, preferred stock, IPOs, to say nothing of the dreaded collateralized debt obligation - are utterly moribund.

But companies' need for capital has not waned, if anything quite the opposite. And therein lies the basis for optimism about the future of what used to be known as Wall Street. Once bankers and traders can overcome their current funk and start providing the capital their clients want and need, the possibility of a return to normalcy can also proceed apace.

At the moment, a small fraction of the demand for capital is being met by smaller, more entrepreneurial local banks as well as hedge funds and private equity funds that can provide the money and get well paid for doing so. At some point, the Wall Street banks will realize that lending can once again be done profitably and will begin to provide the badly needed grease to the financial system.

A pickup in the issuance of debt and equity and other signs of a healthier capital market will also lead to an increase in the size and number of M&A deals that CEOs are willing to consider. Assuming there are any M&A bankers still around, this, too, would be welcome news for the survivors.

Nobody can predict what the new Wall Street will look like or when it will be open for business. But it is a certainty that when it does, the pent-up demand for the old-fashioned products that were once upon a time Wall Street's specialty - capital raising and advice on mergers and acquisitions - will put a spring back into the step of bankers and traders.

After the market disruptions following the Crash of 1987, the credit crunch of 1991-92, the bursting of the Internet bubble in 2000 and September 11, bankers and traders lamented that the "good old days" were gone and would never come back, and, incredibly, each time, the markets rebounded more strongly.

This time, the calamity is especially large and the faces of those affected are especially long. My bet is that this, too, shall pass.

William Cohan is a former senior-level Wall Street M&A banker. He's also author of The Last Tycoons: The Secret History of Lazard Freres & Co. His new book, House of Cards: A Tale of Hubris and Wretched Excess on Wall Street, will be published by Doubleday in 2009.