Income Dynamics, Economic Rents and the Financialization of the ...

ployees have reaped the rewards associated with the financialization of the US economy. In in-
surance, banking, and real estate it is the owners of capital who have accumulated most of the
economic rents produced through financialization, although only in banking and for the new
bank holding companies does this seem to be a long term, recurring transfer of national income.
Of course, after 1999 the distinction between banks, insurance and investment firms was consi-
derably weakened. The movement of investment activities into bank holding companies may
weaken the influence of the employee compensation model in the old securities industry, as these
activities become absorbed in more bank-like organizations and the super earnings of traders are
transferred into super profits of bank holding companies. In the absence of new regulation (or
taxation) we can expect that these super-sized diversified financial institutions will only increase
their ability to absorb the income generated by the US economy. If that income is again depen-
dent upon or is in a positive feedback loop with speculative financial investments it is only a
matter of time before the next bubble and systematic crash.
This paper is written at the beginning of 2010, just as Wall Street is making record pay-
ments to its employees (Luchetti and Grocer 2009) and Ben Bernanke was reconfirmed as the
Chair of the Federal Reserve Bank. There is thus some reason to expect that there will not be a
fundamental shift in the regulatory approach to the finance sector and that finance as the new
religion of economic policy may continue its sovereignty (Davis 2009) and continue to benefit
from the income rents that accrue to its cultural as well as economic centrality. Somebody, of
course, always pays the rent. In this case it seems to have been the rest of the economy, both
non-financial firms that paid increasing portions of their incomes to the finance sector and
households whose wages were restricted by the declining market power of their employers and
their increased payments of fees and interest to a financial sector ever more clever at extracting
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