Unregulated financial innovations simultaneously inflate sector incomes and systemic risk

Evidence

An example of such a dynamic at work occurred when credit default swaps became common practice and the proliferation of mortgage-backed assets both contributed to massive income increases in the finance sector and paved the way for the 2008 economic crisis. Lack of regulation in an economic sector can also contribute to massive sectoral growth and, potentially, economic inequality across and within sectors. — Nathan Kelly and Jana Morgan, How US Policymaking Institutions…, 169

Categorization

• XREF: Connects to the reader’s interest in structural mechanisms behind the 2008 crisis, pairing with accounts of Dodd-Frank and financial mega-institutions.