1. Stephen G Cecchetti and Enisse Kharroubi write,

we find that manufacturing sectors that are either R&D-intensive or dependent on external finance suffer disproportionate reductions in productivity growth when finance booms. That is, we confirm the results in the model: by draining resources from the real economy, financial sector growth becomes a drag on real growth.

Pointer from Mark Thoma.

2. James Kwak writes,

According to Wilmarth, the fundamental problem, and the reason things don’t get significantly better, is the political power of major financial institutions.

He refers to this article.

Pointer also from Mark Thoma.

I would add that the proposed housing finance “reform” in Corker-Warner is exactly what Wall Street wants. If enacted, it will move essentially all of the risk in housing finance to the shadow banking sector. My guess is that interest-rate risk will prove to be the next bomb to go off, and it will not have a very long fuse.