Wall Street, like any big American business, presents itself as a creator of jobs and economic value. They wield the magic of prices, markets, and sophisticated financial instruments to allocate capital to its most productive locations. Hey presto, more growth and more wealth.

The lickspittle financial press takes this as axiomatic, as Alex Pareene once discovered on CNBC, where the hosts reacted with stunned incomprehension to the argument that high bank profits are not their own justification.

Yet one should not take Wall Street at its word. The financial sector now accounts for about 6.5 percent of GDP, and up to 40 percent of corporate profits (depending on the state of the market). And in many cases, those profits are the result of economic parasitism rather than capital allocation.

Compare a community bank to an organized crime syndicate. The former institution (ideally) lends out money to local creditworthy businesses and individuals, so that they can start new stores, build homes, buy land, and so forth. The bank's profits come from the success of the funded projects. Organized crime has a much simpler business model: Send people around to say, "Pay me or I'll beat you up."

The former example is the picture-book model of capital allocation. The latter is pure economic parasitism. And in many instances today, Wall Street is closer to the second model than the first.

For a very recent example, The New York Times has the goods, in a must-read extensive investigation of what happens when one turns over bedrock public services to hedge funds. These are not ordinary private contractors, and not even regular old banks — hedge funds are at the bleeding edge of Wall Street aggressiveness. In many American towns and cities, hedge funds now effectively control many basic services — most alarmingly, 911 and emergency services. But when they took control of these services, they did what any amoral entity searching for short-term profits above all would do: Cut costs to the bone, and jack up prices as high as possible.

The result is a serious undermining of critical emergency services, resulting in things like badly understaffed ambulance crews, paramedics having to filch supplies from a nearby hospital, and a homeowner billed $15,000 for a firefighting team that failed to stop his house fire — and was then sued when he refused to pay. In sum:

For governments and their citizens, the effects have often been dire. Under private equity ownership, some ambulance response times worsened, heart monitors failed, and companies slid into bankruptcy, according to a Times examination of thousands of pages of internal documents and government records, as well as interviews with dozens of former employees. In at least two cases, lawsuits contend, poor service led to patient deaths. [The New York Times]

In a bitter irony, communities were forced to turn to Wall Street after the financial crisis of 2008 decimated their budgets — itself caused by Wall Street malfeasance. That's a neat trick: First wreck the economy through greed and systematic fraud, and then swoop in to further pillage struggling communities whose tax bases have been cratered by the recession you caused. As Mike Konzcal writes, "Finance used to be a way of getting money into our productive enterprises. Now it's a tool for taking money out of them."

Of course, hedge funds and the like do not rely on raw physical threats to suck the blood from American communities. That would be gauche. Instead they fiddle around with money, property, and contracts to achieve the same thing — and hence do so backed by the coercive power of the state. Despairing communities "freely" sign some foot-thick contract about services, and it ends with a homeowner sued for tens of thousands of dollars over a failed service. Sure, Wall Street can't really break your kneecaps, but they can use the courts to repossess your house or car.

After the New Deal, tight financial regulation shrank finance's share of the economy to about 3 percent and its share of corporate profits to about 8 percent, as compared to today's 6.5 and 40 percent. There is not the slightest whisper of evidence that this was holding back economic growth — on the contrary, America experienced its biggest boom of all time, before or since. Indeed, today's growth rates, with Wall Street the unquestioned economic master, have been extraordinarily weak.

The problem with cancer is that it diverts nutrients into endless expansion of useless tissue, until eventually your remaining healthy systems can no longer maintain themselves. That, I suggest, is basically akin to what has happened to Wall Street. A necessary part of a capitalist economy has metastasized far beyond any conceivable overall utility, and is increasingly resorting to outright banditry to keep the profits flowing. The only bright side is that there is every reason to think that chaining down Wall Street with deliberately onerous regulation, as happened in the 1930s, will help rather than harm the average American citizen.