Have you tried to get a home mortgage recently?
No less prominent a borrower than newly installed President of the Minneapolis Federal Reserve Bank, Neel Kashkari, tried last year. He called it an "extraordinarily painful" process.
That's just one small example of the effects of that over-regulation of the financial sector has had on our everyday live since the financial crisis.
Main Street depends on Wall Street. If we are to increase the growth rate of our economy and create more jobs, then we need to get cheaper credit more efficiently into the hands of businesses. We also need to raise trillions of dollars of public and private capital to invest in modernizing the physical and technological infrastructure enterprises of all kinds need to be more productive.
Which means... we need to free financial institutions to help Main Street.
Which is the goal is of a pair of executive orders signed by President Trump shortly after his inauguration.
One of the biggest beneficiaries of Trump-style deregulation could be a resurgence of financial innovation.
Ever since the financial crisis "innovation" has been a dirty word. But innovation, per se, is neither good nor bad. The same financing vehicle that nearly blew up the world economy -- mortgage-backed securities - also gave us the fixed rate mortgage, which is the mainstay of homeownership in America.
Former Federal Reserve President Paul Volker once famously claimed that the only modern financial innovation to have benefited the world was the ATM.
But what about the 401(k) plan and mutual funds, which make it possible for millions to invest and grow their retirement savings? What about mobile payment services that make paying for goods and services more convenient? What about options and futures that make it possible for businesses to lock in their cost of goods?
What about alternative investments that allow pension funds and hospitals and colleges to increase the investment returns they depend on to pay benefits, treat patients and educate students without taking on more risk? Or crowd sourcing and micro finance, which help get capital into the hands of ventures too new and innovative to be attractive to the usual bank and capital market sources?
"Financial innovation offers hope," writes Yale Economist and Nobel Laureate Robert Shiller in his book, Finance and the Good Society. "Our civilization is built on financial innovation."
One "green project" from early in my career illustrates how financial innovation can promote positive social outcomes.
In the early 1980s, the then Mayor of St. Paul Minnesota, George Latimer, proposed a massive infrastructure project which involved ripping out all the boilers and air conditioners in downtown St. Paul and replacing them with a centralized energy system. The system would burn whatever environmentally friendly fuel was cheapest, use excess steam to co-generate electricity, and thereby lower utility costs for businesses in one of the coldest cities in America.
Despite tens of millions of dollars of public, private and not-for-profit money, St.Paul's District Energy project at the last minute looked to founder upon high interest rates.
Innovative solution #1 -- low cost short term floating rate municipal bonds, a development so new we had to research its legality under state law. Floating rate bonds lowered interest costs. But they also exposed the project to unacceptable risk if interest rates rose.
Innovative solution #2 - an insurance policy that capped the project's interest expense -- the first-ever interest rate cap in the municipal bond market.
District Energy is still operating today, much decorated as an example of environmentally friendly economic development. But it wouldn't even exist without a 35-year old financial innovation.
Recently, I sat next to another Nobel Prize winner, Robert C. Merton, flying to speak at a conference on defined contribution plans. What did he want to talk about? The retirement savings crisis in America. In Merton's opinion, the well being of retirees could be improved by designing better reverse mortgages. (Reverse mortgages allow individuals to tap and live on what is usually their single biggest asset - the equity in their homes.)
His idea? Stop talking to lenders about reverse mortgages. Start talking, instead, to equity investors who want to participate in the single biggest asset class in the world. Without a change in the attitude of regulators towards financial innovation, however, Merton's enhanced reverse mortgage solution isn't likely to see the light of day.
Trump's recent executive orders were the starting point for that much needed change.