We are witnessing the decline and fall of investment banking as we have known it for the past 40 years.

The evidence is everywhere. The increasing regulations on Wall Street — as required by the Dodd-Frank law and still being written by the Federal Reserve, the Securities and Exchange Commission, the Commodities Futures Trading Commission and others agencies in the US and Europe — will require the remaining companies to increase their capital, curb their risk-taking and reduce their principal investing.

Aside from the fact that investing principal and proprietary risk-taking per se had nothing to do with the financial crisis — and that the ability of Goldman Sachs Group to make a huge proprietary bet against the mortgage market probably helped save the firm — these new rules will curb Wall Street's revenue and profitability at a time when the business itself is suffering a severe slowdown. (What sunk Wall Street in 2008 was the seemingly more conventional business of the manufacture, packaging and sale of increasingly risky mortgage-backed and other debt securities.)

Not being able to make those big proprietary bets when you see them developing — in effect, the closing of the casino that Wall Street has become over the past few decades — will severely limit bankers' money-making opportunities. It will also protect the rest of us when those big bets go wrong or are perceived to be too risky. (For every Goldman Sachs acting brilliantly, there is an MF Global Holdings acting foolishly).

There is little debate anymore that Wall Street had become highly dependent on its trading operations. Something like 90 percent of Bear Stearns's profits in the years leading up to its March 2008 demise came from its trading and debt-origination activities. At Goldman Sachs in 2010, its traditional investment-banking operations generated only $1.3 billion of $12.9 billion in pretax earnings, about 10 percent.

The slowdown in business, combined with the looming trading curbs, has resulted in job losses across Wall Street. Morgan Stanley recently announced it was firing 1,600 employees. Goldman Sachs has done its usual turn of eliminating the bottom 10 percent of its workforce and a group of its long-serving partners. Bank of America announced that about 30,000 employees would be chopped by the end of 2012, although a number of the firm’s investment bankers lost their jobs in the past month.

Yet those suffering the most are the foreign firms that were trying to break into Wall Street's business. Nomura Holdings has pretty much scuttled its most recent Wall Street experiment (it bought Lehman Brothers Holding Inc.'s European and Asian banking operations) and firms such as Societe Generale Credit Suisse Group and Royal Bank of Scotland Group are all cutting Wall Street bodies.

In November, Bloomberg News estimated that more than 200,000 people who work in finance had already lost or would lose their jobs this year.

The vast sums overpaid to bankers and traders will inevitably continue to fall as well — as many of them are finding out this bonus week. The decline in Wall Street's compensation will mean less tax revenue for New York City and New York State and fewer government services for the rest of us (absent higher taxes).

The most reliable leading indicator of Wall Street's future prospects is the way recent graduates of Harvard, Princeton and Yale — supposedly our best and brightest — choose to spend their time after graduating. For years, hordes of graduates from those schools beat a fast path to Wall Street. Now the road is far more difficult to travel. There is the prospect of incurring the wrath and scorn of fellow students who make up the various Occupy Wall Street movements — a fact not likely to deter many — and then there are dimmer prospects for a job on Wall Street generally, what with the slowdown in business.

According to a Dec. 21 article in the New York Times, whereas in 2006 some 46 percent of Princeton graduates who had jobs lined up after graduation went to Wall Street, four years later that number had fallen to 36 percent. At Harvard, in 2006, a quarter of the class got jobs in finance; by 2011, that number had fallen to 17 percent. At Yale, in 2006, 24 percent of the graduates had jobs in finance and on Wall Street, while in 2010, the number of graduates going to Wall Street had fallen to 14 percent.

The word around Goldman Sachs, I'm told, is that even those offered a still highly coveted entry-level job at the firm are having second thoughts about taking it. More and more, banks are losing talent to Teach for America, a fact that may turn out to be one of the most heartening consequences of the financial crisis.