TPM Reader PW with some more thoughts on the size of the finance 'industry' ...

Absolutely. You've probably been noticing some people talking about "overcapacity" in the finance industry, and in a sense this is what they're talking about. It's like the auto industry's ability to produce way more cars than the world needs or wants to buy in a given year, only worse. Worse because finance wizards, like doctors, are also the ones telling you how much of their product you need to buy to maximize your investment returns -- indeed, in the case of funds that they manage, they're the ones who make that decision for you. So the more masters of the universe there are (attracted by the way-higher-than-median compensation) the more trading and the more deals you need to generate the commissions and underwriting profits to keep them in cigars and summer homes. And the more they tilt the playing field to divert surpluses to themselves, leading to more of the "best and brightest" going into finance...

So what we really need is a downsizing along the lines of the auto industry's, against a lobby that makes the AMA and the legal profession look like the Society of Friends.