Not only did rapid financial innovation enable Wall Street to encourage risk-taking through record pay, but this process also diverted human resources away from more traditional productive occupations towards the shadow banking system. Anecdotal evidence suggests that, lured by record compensation, “30–40% Duke Masters of Engineering Management students […] chose to become investment bankers or management consultants rather than engineers”.
23 Of course, an equally important reason for the increase in the size of the financial sector is the global accumulation of savings over time. It has been argued 24 that the pre-crisis boom in US real estate and securitisation markets reflected high foreign demand for safe US assets resulting from “excess world savings” in the context of persistent global imbalances.