This is a precise question that has been "on" here for some time. I have only just entered, so think it best to answer more broadly. There are two important entry-points into present culture for Lonergan's economic analysis: [a] the elementary area that I have dealt with in various places, e.g. in chapter one of Sane Economics and Fusionism (SEAF), or in the Appendix to The Road to Religious Reality (RRR). That entry point is summarily describe by the claim,"there are two types of firm", and it can be communicated to schoolkids in grade 11. the area of the question asked,: the area that I can roughly designate as the area of the commoditization of money: it taints what we might call old-style ordinary banking. There is a literature on the tainting, and some references and discussion are given in SEAF. For a glimpse of the tainting I recommend three pages of The Economist (October 18, 2008), 79-81.
(I can send these to interested people). One can, of course, google Hedge Funds, Credit Default Swaps, Derivatives, etc and get descriptions but not critical assessment. E. g., the three pages from The Economist talks of the Chicago Black-Scholles theory of option pricing, but to find the folly of that theory - and most other probabilistic messes re optioning - you need to ingest the sanity of my Randomness Statistics and Emergence, chapter 4, on "Reasonable Betting" .
There is lots more to say about this mess, but perhaps I might put in here a general presentation that I supplied to someone interested in the Occupy Wall Street Movement, and then make some concluding points..
Here you are:
The Gross Immorality of Higher Financing and Trading
The “Occupy Wall Street” has the backing of the Scientific Economics generated by Bernard Lonergan seventy years ago. That theory does not suit the Establishment: it reveals simple errors regarding the nature and flow of monies.
Money, in a sane economy is intrinsically connected with the promise of production, including creativities of productive imagination. The structure of well-working economy does in fact generate, in definite rhythms, a flow of money that becomes available for sustained creativity. This flow of money is a delicate flow, needing communal care, which care must be rooted, of course, in individuals who are genuinely caring. There is a statistics of such individuals which, in a sane economy, would be a Poisson distribution in favor of sanity: the lunatic and greedy would be a small group. Present culture pitches the curve in the opposite direction: indeed, it is taken for granted that money-grabbing is a world of adventure. One hopes for moral shifts, but meantime legislation is needed to cut out the world of commoditized money from the global economy.
There are a host of other ills but this one associated with Wall Street needs urgent tackling in the face of contemporary global money-crises. But what eventually has to be faced by economists is that the present economic pseudo-science is just that. It lacks the correct elementary variables.
Concluding Comments:
The end of that previous paragraph points back to [a], and on that there is the grade 12 class stuff I mentioned above. A really good commonsense presentation, by 5 authors, is available in the journal Divyadaan, Vol. 21, no. 2 (2010), "Do you want a Sane Global Economy?". I have copies i can send on, free, if you are interested in this follow-up.
But on the banking question, we need to tackle, on various levels, the morality of the commoditization of money. We have to get back to messing around with, inculturating, the primitive reality of money as promise, as "taking note of promises". Later cultures will appreciate this as a New Covenant of Global Promise. [This is utterly remote from the financial jugglings in Europe at the moment!!].
The 'taking note' has to build up into a culture that appreciates the radical meaning of CREDIT, giving credit for a good inventive idea [Schumpeter's focus in ]Business Cycles] (1939)] . Robert McNamara (1968, his takeover of the World Bank) destroyed this and the mood then of American financial madness was there to enlarge the ignorance and malice.
The proper economic theory of Lonergan brings out the delicacy of controlling democratically the financial flows [see The Financial Problem in the 1942 mss, but broader the full meaning of 'Concomitance' as supplied by the index to CWL 21]. That delicacy manifests as immoral the idiocy that has emerged in the past sixty years of Hedge funds, mad mortgaging and packaging, CDSs, etc etc. NOW THIS NEEDS TO BE WRITTEN UP IN A GOOD ESSAY: ANY TAKERS??
The legislative elimination of that zone is only a beginning of a cultural re-education, back to the fundamental meaning of CREDIT. And then there is the larger education that breaks the madness of the removal of responsibility by myths regarding corporate personalities.
Perhaps in 50 years the economic news in papers and TV will actually be about creativity and inventive relevance, and in a 100 years Stock Markets will be quiet places that open for a few hours once a month!!
Phil McShane