It is dangerous to equate the complexity of some financial products with social uselessness, which is essentially what Lord Turner has done. Collateralised debt obligations (CDOs) are a good example. These instruments allow a single type of investment to be packaged in such a way that investors with different risk and return needs can all find their investment requirements satisfied. The result is that the risk can be transferred at a lower cost, businesses can be funded more cheaply and the economy can grow at a faster rate. This is socially useful.

The complexity of these products means that they carry significant risks. There are examples where the potenatial gains are relatively modest, but where there is a small but real chance that an entire investment will be lost. The same is exactly true of corporate bonds, a major source of capital for companies. There is also a risk that those selling these complex products will try to transfer as much risk as possible at the lowest price. This, again, is exactly true for corporate bonds.

This is not to say that banks have been blameless in this financial crisis. There has, at times, been woeful ignorance of the decisions being made in individual departments of financial institutions. In particular, the total risk to which institutions were exposed was not fully appreciated. However, this is a matter of corporate governance, and not an argument for abandoning potentially useful financial instruments.