I often play "defender" of the finance industry among my friends, but I think we should separate two claims:
1) finance, as a whole, is "bad" for whatever reason
2) separate from (1) the people and companies involved in finance are "bad"
These are two entirely different claims. It's totally possible to believe that the finance industry provides valuable capital allocation and risk management services, but to also believe that the companies running these services have become corrupt (and that said corruption happens at the expense of the "99%").
I don't think one can reasonably blame the population at large for suspecting something fishy. Between bailouts of "clearing house counterparties" like AIG/Fannie/Freddie, below-inflation Fed Funds rate to which finance elites have exclusive access, a revolving door of GS alumni at Treasury, etc., one could easily be forgiven for suspecting systematic corruption. The only way to overcome this predisposition is an open commitment to transparency and "taking your lumps when you deserve them", which, in my opinion, has not been demonstrated by the finance community vis-a-vis the taxpayer.
I agree with the attitude of this post, but I'm puzzled that you criticize the Fed Funds rate as below inflation. This is how you create an expansionary monetary policy which is the correct response to a credit-collapse recession. This enriches commerical banks, but all monetary policy is distortionary.
A good alternative might be helicopter money. I wonder how well that would do, politically.
Sorry, I didn't mean to align myself with specific monetary policy. I barely know anything about it. The only point is that I personally can't call up Bernanke for a Fed Funds loan, so the expansion of the money happens asymmetrically across society (in particular, preferentially for the Federal Reserve member banks).
I regret mentioning it. I don't want this to become a Federal Reserve or monetary policy debate. My bad. Go in peace :-)
I have no problem creating enriching commercial banks in the short term to stop a credit-collapse, but steps could be taken to correct that distortion later. None have.
I don't think one can reasonably blame the population at large for suspecting something fishy. Between bailouts of "clearing house counterparties" like AIG/Fannie/Freddie, below-inflation Fed Funds rate to which finance elites have exclusive access, a revolving door of GS alumni at Treasury, etc., one could easily be forgiven for suspecting systematic corruption. The only way to overcome this predisposition is an open commitment to transparency and "taking your lumps when you deserve them", which, in my opinion, has not been demonstrated by the finance community vis-a-vis the taxpayer.