The death knell for the stand-alone investment bank came on Sunday night with the Federal Reserve approving a request from Goldman Sachs (GS) and Morgan Stanley (MS) to become bank holding companies. With Treasury stepping in to save Wall Street’s bacon it was only a matter of time that the last two giants would pursue a bath that made each look and feel more like a bank instead of an investment bank (see “How to Play the Wall Street Bailout“).

Risk and debt brought the system to its knees.  In order to reverse that process we must de-leverage the system.  Doing so will greatly reduce risk and hopefully put us back on track going forward. Although the market cheered greatly at the mass intervention, it is clear that the entire focus of traders is on the short term…Get me through the day…I’ll worry about the long term tomorrow.

The problem, as I see it, is that investors need to focus on the long term as well as the short-term.  Specifically, very little attention is being paid to a Wall Street that takes less risk. Sure, the system was saved, but at what cost? The landscape on Wall Street has been fundamentally changed and there can be little doubt that such a change will result in more safety and thus smaller profits (see, “5 Ways to Recession-Proof Your Portfolio“).

While it is a positive for GS and MS to add the bank holding status to their arsenal, the end result will be a firm that must make its money in very different ways.  Gone are the wild, wild West days that allowed traders to roam free placing huge bets using leverage. In its place will be … > less debt and more traditional ways of making money.  GS and MS will be able to take deposits and lend that money out at a higher rate, but they won’t be able to lever up 100 times like the good old days.

Indeed, traditional profits centers for investment banks like underwriting, advising and other fee generating activities will remain, but gone will be the derivatives desk and its freewheeling ways. The bulls suggest that with the landscape decimated, investment banks like GS and MS will be able to increase these traditional modes of revenue generation.  That may be true, but I suspect the impact will be minimal.

There are plenty of firms offering the traditional models of investment banking and those displaced by bankruptcies will only migrate to other firms or new firms will sprout in its place.  That’s how capitalism works especially when the barriers to entry are low. The market reaction to the news somewhat reflects the reality of the new future for these firms.  GS is trading modestly lower down around 4%.  MS on the other hand is trading higher by more than 2%.

The reason for the rise in MS is directly related to a cash infusion by Mitsubishi Financial Group.  No matter that Mitsubishi receives a 20% stake in return.  Again the focus is clearly on the short term. Indeed there are very good reasons to celebrate the ability to raise capital.  The problem is that the long term business model has changed so fundamentally that current investors will most likely suffer as a result.

The drunkenness caused by survival is more of a relief rally.  Owning the investment banks at current levels makes little Rational sense to me.  There is far too much uncertainty regarding the long term future of these stocks. About the only good news I can find is that the Federal Reserve, and not the SEC, will regulate what transpires at both of these firms.  I put far more trust in the central bank.

Changes are coming.  Going forward, as Wall Street morphs into the more staid banking model, revenue and profit growth will suffer.  One need not be a fortune teller to see this coming. And yet stocks still reflect the days of yore.  I think the odds are quite high that an adjustment to the downside will be coming as future performance unfolds.  Hold on if you are willing to take the risk.

Otherwise steer clear of both GS and MS.  Wait until the future becomes clearer before venturing into either of these stocks.

This article was written by Jamie Dlugosch, contributor to InvestorPlace.com. For more actionable insight like this, go to: www.InvestorPlace.com.