Yes, a smaller financial sector would make lending more expensive. But would that be a bad thing, socially speaking? A smaller financial sector would stabilise

Yes, a smaller financial sector would make lending more expensive. But would that be a bad thing, socially speaking? A smaller financial sector would stabilise the financial and economical system, albeit at a lower level of economic activity. The less rich and powerful suffer most from economic instability. They also stand to gain most from increased stability. Ask people from the Baltic states about what happened in 2008-2009... Who is the biggest beneficiary of credit? Us, the rich and powerful! Have a look at the most expensive thing most people ever buy in their lives: a house! Housing prices and interest rates are directly linked. More expensive lending would mean lower housing prices. To some extent, deflating that bubble is actually a good thing for the less rich and powerful!