The Peterson Institute's Adam S. Posen and Marc Hinterschweiger have a couple neat graphs making the case against financial innovation. They did not begin as skeptics. They liked the idea of financial innovation. They believed the promises "that expansion in the use of newer derivatives and the like would lead to an expansion in the country’s capital stock, and that these financial products would be useful to nonfinancial companies, not just to banks." But that didn't happen. Their first graph plots the growth of derivatives against the growth of capital stock. It basically shows a massive rise in fake money that's unconnected to any similar increase in real money.
The second graphic shows the counterparties for derivatives. Again, facts did not match theory:
The theory was that financial innovation was making the economy stronger. The fact was that we were inflating the financial sector so it looked bigger. Posen and Hinterschweiger end with an appropriate note of caution. "We are already hearing warnings from the financial industry that government should be careful not to overreach in its attempts at reform, for fear of harming financial innovation," they write. "While that is a worthy principle, our belief is that the record of recent financial innovations acts as a warning to be skeptical about excessive claims that all financial innovation is worthwhile. What was advertised as something to redistribute risk, and thereby increase productive investment, generated little capital formation; what was supposed to benefit nonfinancial businesses was mostly used in a speculative game between financial players."