I don't believe this analysis of financial innovation is accurate. On average most financial products that have been invented in the last 30 to 40 years have been a huge benefit to society as a means of reducing risk, and allocation capital to its highest and best use. Using data points from a small time period to conjure up generalizations is a disservice.
From The Baseline Scenario:
'financial innovation is generally good in and of itself, although it has a high risk of creating “negative spillovers” – a higher risk than for non-financial innovation: “Most financial innovations are positive, and we don’t know ex ante which will be negative, so giving ourselves the power to block certain innovations because they might have negative spillovers is risky.” At first blush, this seems like a reasonable extension from real-world innovation to financial innovation.'