While the financial innovations helped the stock markets grow at a whopping pace in the 1990s and early 2000s, they also brought about a false euphoria and when the bubble burst, the current slowdown was imminent.
The 1980s heralded many changes in the banking and securities exchange sectors the world over. It was an era of deregulations and free flow of currency.Due to changes in policies related to the stock market like bond trading, invention of securitization, interest-rate swaps, and credit-default swaps, bankers could increasingly make huge profits in the stock markets in the past two -three decades. Financial services also benefitted from higher investments made in securities by the increasingly wealthy population, encouraged by the IRA and 401 (k) plan.
With everyone making money, there seemed to be clout surrounding the financial experts, and the growth of private banks was considered synonymous with economic growth. According to Simon Johnson, "the great wealth that the financial sector created and concentrated gave bankers enormous political weight-a weight not seen in the U.S. since the era of J.P. Morgan (the man)."
In the same article, the chart showing the percentage of financial industry's profits as a share of U.S business profits indicates a slow increase fr