Feature

Our bloated banking sector

Do we really need so many bankers?

David FutrelleTime.com

Do we really need so many bankers? asked David Futrelle. Though the financial sector is “as necessary for the economy as blood is for our bodies,” it’s grown far larger than it needs to be. In the 1950s, an era of growth and prosperity, the financial sector accounted for 3 percent of GDP. Today, it accounts for more than 8 percent, and “our economy is a mess.” A new paper by several International Monetary Fund economists says large economies can have “too much finance,” and that banking in the U.S. has almost certainly reached the point where it adds nothing to economic growth. But even if we reduce the number of our bankers, don’t we still need to pay them top dollar? The research says no. A recent New York University study suggests that we’re currently paying people in finance “anywhere from 30 to 50 percent more than they’re worth.” At those inflated rates, “bankers aren’t adding value to the economy; they’re extracting a ‘rent’ paid for by the rest of us.” Until we better align our economic interests, “our financial sector will keep costing us more than it’s worth.”

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