Until the recent tempest, Wall Street firms looked like just about the world's best businesses. Year after year they boasted sumptuous profitability, ever-rising share prices, and, if you believed their claims, a new generation of chief executives who had mastered the art and science of risk management. True, it was hard to decipher exactly how they made money. But make it they did, on an epic scale. From 2002 to 2006 the five big independent firms - Goldman Sachs, Merrill Lynch, Morgan Stanley, Lehman Bros., and Bear Stearns - tripled earnings to more than $30 billion and, at their peak, achieved an average return on equity of 22%, rivaling such royalty as the pharmaceutical and energy industries.
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