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Regulating the Financial System to Encourage the Financing of Innovation (as opposed to innovation in finance). Presentation of Damon A. Silvers Policy Director, AFL-CIO To the Conference on Financial Institutions for Innovation and Development Rio de Janeiro, June 27, 2013.
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Presentation of Damon A. Silvers
Policy Director, AFL-CIO
To the Conference on Financial Institutions
for Innovation and Development
Rio de Janeiro, June 27, 2013
The True Cost of the Financial Bubble and Its Aftermath to the United States, not just measured in losses, though those were huge:
Excerpted from Andrew G Haldane, Executive Director, Financial Stability, Bank of England, The $100 Billion Question (March 2010)
Source: Peter Coy, American Families Are Poorer Than in 1989, Bloomberg (June 12, 2012), http://www.businessweek.com/articles/2012-06-12/american-families-are-poorer-than-in-1989; Felix Salmon, Chart of the day: Median net worth, 1962-2010, Reuters (June 12, 2012), http://blogs.reuters.com/felix-salmon/2012/06/12/chart-of-the-day-median-net-worth-1962-2010/
The cost of the financial bubble also includes the effects of the failure to productively invest capital, including the decline of government investment in research and development.
Source: Center for American Progress and Global Climate Network, Low-carbon Innovation: A Uniquely American Strategy for Industrial Renewal
Between 1999 and 2008, U.S. domestic expenditures on R&D—led by private sector investment—remained almost unchanged as a percentage of GDP, while many countries saw significant increases in R&D investment as percentage of GDP.
Source: OECD, http://www.oecd-ilibrary.org/sites/sti_scoreboard-2011-en/02/05/index.html?contentType=&itemId=/content/chapter/sti_scoreboard-2011-16-en&containerItemId=/content/serial/20725345&accessItemIds=/content/book/sti_scoreboard-2011-en&mimeType=text/html
While it is difficult to measure the implications of underinvestment, there are three areas critical to U.S. competitiveness and global environmental stability in which the underinvestment is obvious:
The U.S. remains one of the world’s largest per capita producers of CO2
Source: American Society of Civil Engineers, http://www.infrastructurereportcard.org/a/#p/grade-sheet/gpa
These Developments Resulted from Two Problems with US Financial System Regulation:
Source: Mark Hirscheya, HillaSkibab and M. BabajideWintokia, The Size, Concentration and Evolution of Corporate R&D Spending in U.S. Firms from 1976 to 2010: Evidence and Implications (January 2012)
Impact of Deregulation on the Behavior of Financial Institutions toward Innovation:
In this environment, banks moved into a variety of higher margin businesses—residential mortgage origination and securitization, unregulated insurance brokerage (derivatives), and proprietary trading.
Source: Michael Chui, Derivatives markets, products and participants: an overview, IFC Bulletin No 35 (February 2012), http://www.bis.org/ifc/publ/ifcb35.htm
Ultimately, the result was the transformation of banks from their previous status as regulated utilities into high risk, high return institutions.
Source: PricewaterhouseCoopers National Venture Capital Association, MoneyTreeTMReport
The Political Economy of Deregulated Finance and the Shortfall in Public Goods
This wealth, translated into political power, seeks to do two things—to keep the taxman from the door and to open up new opportunities for high fee money management on favorable terms.
Source: Americans for Tax Fairness, http://www.americansfortaxfairness.org/
The Dodd Frank Act and the US Experience with Financial Reform since the 2008 Crisis