Simon Johnson and James Kwak: For the past 30 years, financial innovation has increased costs and risks for both individual consumers and the global economy. Today's challenge is to rethink financial innovation and learn how to separate the good from the bad. The main purpose of financial innovation is to make financial intermediation happen where it would not have happened before. We cannot say that innovation is necessarily good simply because there is a market for it. The fact that there was a market for new houses does not change the fact that building those houses was a spectacularly destructive waste of money. Therefore, when it comes to financial innovation, we must distinguish beneficial financial intermediation from excessive, destructive financial intermediation. The key to any successful regulatory regime is discerning the difference between good and bad financial innovation. The presumption should be that innovation in financial products is costly and should have to justify itself against those costs. Instead of a regime where any product is allowed so long as it is sufficiently disclosed, we should consider a regime where only certain types of products are allowed to exist, and they are allowed to vary only along specific dimensions.
The Economist: Financial progress is about learning to deal with strangers in more complex ways.
Paul Graham: Don't just not be evil. Be good.
Simon Johnson, in the May 2009 issue of The Atlantic: The conventional wisdom among the elite is still that the current slump "cannot be as bad as the Great Depression." This view is wrong.
Robert Levine: The Great Depression brought the New Deal to the United States. It brought the rest of the world Nazism and universal war. This time, though, many nations have nuclear weapons. "Maybe we could" is the limit of optimism in this paper. The world ahead looks difficult.
An exchange among siblings: Lisa: "Can't you see the difference between earning something honestly and getting it by fraud?" Bart: Hmm, I suppose, maybe, if, uh ... no. No, sorry, I thought I had it there for a second."
A final thought from the bankers: Revolutionize your heart out. We'll still have this country by the balls.
Finance: Before the Next Meltdown | 
