Good Finance Gone Bad

As the Lehman anniversary approaches, defenders of the financial sector struggle into position – partly in response to your comments (also here). They offer three main points:

1. We need finance to make the economy work.
2. Financial innovation delivers value, although it’s not perfect (but what is?)
3. Don’t kill the goose that laid the golden egg.

Point #1 is correct, but this does not necessarily mean we need finance as currently organized. The financial sector worked fine in the past, with regard to supporting innovation and sustaining growth. Show me the evidence that changes in our financial structure over the past 30 years have helped anyone outside the financial sector.