In the past, the financial system has contributed to inequality and retarded equitable growth, rather than facilitating it, in five key ways:
1) In the lead up to the financial crisis, managers of firms benefited from excessive risk-taking, while in the wake of the crisis society at large paid for that excess.
2) Weak consumer and investor protections and exploitative financial products contributed not only to individual abuses but also to broader economic dislocations from the resulting bust.
3) The structure of financial products and services often has generated huge fees while reducing the opportunities for households to save, which dramatically limited their opportunities to invest in human and financial capital that would improve their long-run prospects and contribute to domestic savings.
4) Minority and female entrepreneurs, who start out with lower income and wealth, have had more difficulties accessing finance to sustain and grow their business.
5) Power concentrated in the financial sector has helped to entrench finance-favored tax and regulatory policies and to reduce the ability of democratic processes effectively to address necessary reforms.
There has been progress under the Dodd-Frank Act and global reforms in tackling many of these problems, but much more work needs to be done.