"I know this is bad but I find something aesthetically beautiful about it. If you have a pot of money [pensions] that is immune to bank runs, over time, modern finance will find a way to make it vulnerable to bank runs. That is an emergent property of modern finance. No one sits down and says “let’s make pension funds vulnerable to bank runs!” Finance, as an abstract entity, just sort of does that on its own."
Surely nobody in the world of finance has been making money off of these pensions becoming vulnerable to bank runs. And even if there were someone profiting, they wouldn't have done so by choice, it just happened.
From my read of Levine's explanation, it was really the promise of a greater pension outcome for a given amount of contribution. Whether the contribution was smaller or the outcome larger is kinda immaterial -- the managers were chasing yield.
I am not an expert but if someone managing a pension fund makes it less underfunded by using some of these instruments/techniques they might get a bonus for good performance, don't they? Or am I misunderstanding something.
"I know this is bad but I find something aesthetically beautiful about it. If you have a pot of money [pensions] that is immune to bank runs, over time, modern finance will find a way to make it vulnerable to bank runs. That is an emergent property of modern finance. No one sits down and says “let’s make pension funds vulnerable to bank runs!” Finance, as an abstract entity, just sort of does that on its own."