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 FINANCIAL CRISIS INQUIRY COMMISSION REPORT

institutions, investment funds, governments, and individuals. An increasing amount
of the investment banks’ revenues and earnings was generated by trading and invest-
ments, including securitization and derivatives activities. At Goldman, revenues from
trading and principal investments increased from  of the total in  to  in
. At Merrill Lynch, they generated  of revenue in , up from  in .
At Lehman, similar activities generated up to  of pretax earnings in , up from
 in . At Bear Stearns, they accounted for more than  of pretax earnings
in some years after  because of pretax losses in other businesses. 
Between  and , debt held by financial companies grew from  trillion to
 trillion, more than doubling from  to  of GDP. Former Treasury Secre-
tary John Snow told the FCIC that while the financial sector must play a “critical” role
in allocating capital to the most productive uses, it was reasonable to ask whether
over the last  or  years it had become too large. Financial firms had grown
mainly by simply lending to each other, he said, not by creating opportunities for in-

vestment. In , financial companies borrowed  in the credit markets for
every  borrowed by nonfinancial companies. By , financial companies were
borrowing  for every . “We have a lot more debt than we used to have, which
means we have a much bigger financial sector,” said Snow. “I think we overdid fi-
nance versus the real economy and got it a little lopsided as a result.” 