ECONOMIC REPORT OF THE PRESIDENT

value added of the sector has gradually climbed since then to approximately
7 percent in 2015 (Figure 6-i).
Note that this measure may inflate financial sector growth. For
example, the shift from defined benefit pension funds, often managed
by the pension sponsor, to defined contribution pension plans, typically
managed by a financial services firm, could result in activity shifting
from the sector of the sponsor to financial services.
As the financial sector grows, any associated risks may generate
larger risks to society as a whole. This is not purely a function of size,
but a question of size combined with fragility. In some countries where
financialization has far outpaced that of the United States, the burden of
a failing financial system has been quite large. In Ireland, for example,
cleaning up the financial sector following the global financial crisis
required a sizable government intervention, contributing to fiscal deficits
as high as 30 percent of GDP in 2010. The U.S. financial sector, though
smaller relative to GDP, was still able to generate large economic costs,
helping propel the economy into a protracted recession. When wellregulated
and smoothly functioning, the raw size may be unimportant,
but when problems strike, the size can matter.
The Value of Financial Services
Almost half of the growth in financial services as a share of GDP
from 1980 to its peak in 2006 has been in the securities trading category.
The asset management subcomponent of the securities trading category
Figure 6-i
Financial Insurance and Services: Value Added, 1970–2016
Percent of GDP
9
8
7
6
5
4
3
2
1
Total
Securities
Insurance
Credit
Intermediation
2016
0
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
Note: Quarterly data is used for 2016. Otherwise, data is annual.
Source: Bureau of Economic Analysis, National Income and Product Accounts.
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