Prior to the crisis there was an almost common belief among academics, policymakers and financial regulators, at least in western countries, that the deepening of all financial markets and financial innovation of all types was beneficially to the economy, because greater opportunities for economic agents to trade in financial markets would automatically raise welfare, and would also promote more stable financial markets.
These beliefs look much less tenable today, if not absurdly Panglossian. In particular it is evident that some financial innovations, such as the securitisation of assets, which it was claimed would reduce financial fragility by allowing risk to be allocated to those best able to bear it, did exactly the opposite and created systemic risk on a mammoth scale.