Since the country's policymakers haven't learned much of anything from the most recent financial collapse - no, switch that...those who did learn simply couldn't get the now-standard 60 votes in the Senate to vote for a strong package of reforms - the U.S. financial system continues to erode America's competitive position. While the rest of the economy limps along, financial services industries, which add relatively little of value, jumped back to obscene profitability rather quickly after taxpayers bailed them out.
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The way this industry was able to make so much money was in large part because they were able to create complex financial instruments like derivatives and credit default swaps that most of them didn't even understand, much less the people who bought them.
The problem goes well beyond the stupid, short-sighted greed of most of the financial sector. In order to continue the gravy train, financial companies continue to make ever-more complex products, with lavish salaries that draw away not only our best and brightest M.B.A.'s, lawyers and mathematicians. According to a new Kauffman Foundation study, they are now drawing top graduate students in physics and engineering, the very people who generally our America's key entrepreneurs. You know, the ones who actually create wealth.
Ok, I'm being a little harsh. We need talented people in financial services as we do in so many other industries. But, before the recession the sector accounted for something like 40 percent of the country's business profitability, yet clearly did not and could not account for anywhere near 40 percent of its value. The salaries are too good for most people to stay away, but it would be better for the country if they did.
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