Another day, more extraordinary developments in the financial markets that top the last era-defining episode dating back all of two days ago. What does it mean for law firms when the UK Government plans to nationalise large parts of the banking system and – far from capitalistic outrage – it is the money men urging on Whitehall to cultivate a radically different financial ecology?

I had a chance to gauge the general reaction among the profession yesterday evening at a Legal Week debate that included Freshfields chief executive Ted Burke, Allen & Overy managing partner Wim Dejonghe, Deutsche Bank's Simon Dodds and Sean McGovern of Lloyd's of London.

To be honest, I was surprised how upbeat it was given the unrelenting stream of gloomy news to have emerged in the weeks since the failure of Lehman Brothers. A private equity partner I've known for years was on great form at the drinks afterwards - I asked if he had changed practice area but he assured me (though didn't convince me) there were plenty of opportunities around in such times.

Back to the debate, and the general mood on the panel and the 100-strong audience was that large law firms will greatly benefit from a stream of corporate activity in the convulsing financial sector as the industry radical reshapes. That, according to the room at least, is set to create a new tier of even larger global banks, but will also allow mid-tier houses to rise up the pecking order via forced asset sales. In addition, a new breed of institution is expected to fill some of the space vacated by banks as they de-leverage their operations and become more risk adverse. In theory this leaves the way open for hedge funds, private equity houses and even sovereign wealth funds to do the kind of 'banking' that requires 'skin in the game' as they say Stateside. Understandably, the pure-play advisory investment boutique is seen as likely to make something of a comeback. All this, of course, has major implications for law firms' client positioning.

So much for the short-term. One City veteran whose firm has been scoping out the short, medium and long-term outlook due to the credit crunch got a round of knowing laughter when he described the conclusions about his firm's prospects over those three time-frames as "bullish, bearish and clueless".

The room also agreed that, when everything looks uncertain, the one thing you can count on is regulation: lots of it, and probably much of it not working as it should.

While there was confidence that law firms stand up relatively well in slumps – frankly, I was surprised how much confidence – no one was under any illusion that it's going to be a tough business environment for the next two years. The other surprise was the room's consensus that firms would accept substantial drops to partner profits before they made large-scale redundancies. Well, I've always thought that long-term thinking was a key strength of the profession – looks like they're going to get a chance to put their money where their mouth is.

See Freshfields, Slaughters land £50bn banking bailout roles and Editor's Comment: The R Word for more comment and analysis.

Keep abreast of all the latest post-Lehman developments in our Legal Week Wiki special.