Financial Innovation, Leverage, Bubbles, and Income Distribution
Explore the impact of financial innovation, leverage, bubbles, and income distribution in the economy based on Margaret M. Blair's research at Vanderbilt University Law School. The analysis covers the share of income going to the top decile, employment in the finance sector, assets in shadow banking, leverage ratios of depository institutions vs. shadow banking, and the implications of high leverage levels on debt. Gain insights into the complex dynamics of the financial system through various charts and data presented.
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Presentation Transcript
Financial Innovation, Leverage, Bubbles, and the Distribution of Income Margaret M. Blair Vanderbilt University Law School for Restoring the Balance: Financial Regulation and the Real Economy Conference of Americans for Financial Reform June 28, 2011
Share of Employment in Finance 0.07 Sector Employees compared to Total Number of Employees 0.06 0.05 0.04 0.03 0.02 0.01 0 Year Percentage in Finance, Insurance, Real Estate, Rental, and Leasing Percentage in Finance and Insurance
Ratio of Assets in Shadow Banking to Assets in Depository Institutions 1.4 Shadow Banking Assets Compared to Assets in Depository 1.2 1 0.8 Institutions 0.6 0.4 0.2 0 Year Ratio of Assets in Shadow Banking to Assets in Depository Institutions
Depository Instiutions vs. Shadow Banking Institutions Leverage Ratios 1.02 1 0.98 0.96 Liabilities to Assets 0.94 0.92 0.9 0.88 0.86 0.84 0.82 0.8 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 Year Depository Institutions Leverage Ratio Shadow Banking Institutions Leverage Ratio
90% Leverage $ 1 MILLION $ 9 MILLION DEBT
95% Leverage $500,000 $ 9.5 MILLION DEBT
95% Leverage $ 1 MILLION $ 19 MILLION DEBT
