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The recent financial crisis hollowed out the core of American middle-class financial stability. In the wake of the financial crisis, household net worth in the U.S. fell by 24%, for a loss of $16 trillion. Moreover, retirement accounts, the largest class of financial assets, took a steep drop in value, as did house prices, and these two classes of assets alone represent approximately 43% of all household wealth. The losses during the principal crisis years, 2007–2009, were devastating, “erasing almost two decades of accumulated prosperity,” in the words of a 2013 report. By the Federal Reserve. Beyond these direct household balance-sheet losses, 1 out of every 4 homeowners were underwater by 2009 with mortgages worth less than the value of their homes. If we add the 3.7 to 5 million foreclosures that forced Americans to move from the economic and emotional stability of family homes, we see a portrait of dramatic financial instability in the wake of the financial collapse. And the Federal Reserve’s commitment to low interest rates, so beloved on Wall Street, has prevented many families from rebuilding their wealth through interest on savings; these “zero-bound” interest rates are an impediment to middle-class recovery from the losses of the crisis.

By contrast, the financial sector, the cause of the crisis, has prospered from adversity, growing to 9% of GDP by 2010 even as it became less efficient. This is one of the highest shares of GDP in the past half century and represents 29% of all profits in America. The financial sector earns profits by pooling funds to bring net savers together with net borrowers in financial contracts, a process known as intermediation. Economist Thomas Philippon of New York University found that the profits from intermediation grew from less than 2% of GDP in 1870 to nearly 6% before the economic crash of 1929. After World War II, financiers gradually increased their share of the economy to 5% by 1980, close to what it had been before the crash. The focused deregulatory agenda of the Reagan administration and Alan Greenspan’s deregulatory passions at the helm of the Fed from 1987 to 2006 swelled the balance sheets of financial firms to the high point of 9% of GDP by 2010.

The return to investors did not match the growth in the financial sector’s share of GDP. So what did investors get for their money? Philippon says it’s impossible to beat the market in part because of high-frequency trading that locks out the ordinary investor through sophisticated high-speed computer transmission of orders with preferential cable and algorithmic access to the trading desks.