In recent years, the financial system has come under heavy criticism, especially in the wake of the financial meltdown of 2008 which ruined many lives. It has been asserted that the financial system is a major let down to the various groups of stakeholders. What I am going to present below, then, is a synopsis of the arguments made to support the ‘fact’ that the financial system is a major let-down to various groups of stakeholders.
One group of stakeholders to whom the financial system is a major let down is that of the folks who deposit their money with the various financial institutions. These people often argue that the financial institutions pay them interest rates that are too low (for their savings). Then the financial institutions proceed to lend the (very same) money that is deposited with them (to borrowers) at very high interest levels. The banks/financial institutions pocket the difference between the high interest rates charged to borrowers and the low interest rates paid to the depositors.
Another group of stakeholders let down by the financial system is that of borrowers: who feel that the interest rates charged to them are very high. And this is in spite of the fact that the banks get the money for free – or almost for free (given the low interest rates paid to savers/depositors).
Yet another group of stakeholders let down by the financial system is that of investors: the people who buy the shares of the banks and other financial institutions. These often feel that the dividends paid to them are too low – yet the banks make very huge profits. It is noted that companies in other sectors, like the manufacturing sector, make much more modest profits, yet they seem to consistently pay their investors better dividends. For instance Ford Motors (a manufacturing company), pays its investors much higher dividends/earnings per share than many banks.