One of the top bankers in New York sums up the key for the Wall Street banks in 2008 in one word: capital. The credit crunch has dramatically increased the potential returns for banks with free capital to deploy. “We can make three or four times what we did six months ago using our balance sheet,” he says.

The rub is, of course, that capital is tight on Wall Street. The subprime meltdown has left the banks with massive losses while risks they thought had been passed to other investors are bouncing back on to their balance sheets. The past few weeks have seen Citigroup, Morgan Stanley and Merrill Lynch raising tens of billions of dollars, largely from investors in Asia and the Middle East.