Financial Sector A Bigger Share Of Economy Now Than Before Financial Crisis
The financial industry may have taken a hit during the Great Recession. But relative to the overall economy, it's bigger now than it was before Lehman Brothers collapsed.
The financial sector represents a bigger share of the economy today than it did in 2006, recent Commerce Department figures show -- despite the bailouts, bank failures and political efforts at reform that have taken place since.
The findings -- which, indicate that the financial sector accounts for 8.4 percent of the country's GDP, a greater share than five years ago and one of the highest percentages of the past half century, according to The Wall Street Journal -- may come as unwelcome news for anyone who believes that an outsized financial industry doing too much with too many people's money led the country to financial crisis.
As of March 2011, the financial industry was generating 29 percent of all profits in America -- not quite at 2001's record level of 46 percent, but well above the norm for most of the 20th century, when the financial sector never accounted for more than 20 percent of national profits.
Since the financial sector was gripped by crisis in 2008, few people have argued that Wall Street needs to get bigger. As a result of the crash, the job market has dried up, plunging real estate values have erased millions of dollars in homeowner wealth, and a web of interrelated national deficits threatens to bring Europe to its knees.
Many, from politicians and academics to Tea Party voters and Occupy Wall Street protesters, have assigned the financial sector at least some measure of blame for the economic downturn, arguing that big banks and other institutions gambled and lost so much investor money during the previous decade that it has left the economy unable to self-start.
Critics have also accused the financial sector of stymieing entrepreneurship, by drawing creative talent away, and of exercising undue influence on Capitol Hill, thus standing in the way of meaningful regulation that would prevent a 2008-like scenario from happening again.
But Wall Street itself has taken a hit this year, with more than 200,000 jobs lost in the financial industry alone.
The industry's recovery from near-collapse a few years ago has likely occurred in part because the Federal Reserve spared no expense getting the nation's largest banks back on their feet. Some institutions received more than a billion dollars in undisclosed emergency Fed loans -- a much larger package than the $700 billion bailout package approved by the Treasury Department, Bloomberg reported earlier this year.
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