The spectacle of Southern Cross, the privately owned care homes operator, teetering on the brink of bankruptcy whilst its 31,000 elderly and vulnerable residents worry about being thrown onto the street, is a potent symbol of much that is wrong with the model of the market economy as it has developed in the UK.

Four senior executives sold their shares at the top of the market,, netting £35 million between them, whilst private equity owners traded up the company's debts and restructured it in a way which has now been shown to be totally unsustainable. Doubtless they also took generous commissions and fees for this miracle of financial re-engineering. Private equity after all claims that it makes failing companies stronger by restructuring them. The recent collapse of Focus DIY has highlighted the behaviour of one private equity firm, Duke St Capital, which took a staggering £700 million out of the stricken company after an initial investment of a mere £68 million.

These are examples of the behaviour of a new breed of intermediaries and agents who act in their own self interest rather than in the owner's interest -- much less in the public interest. They concentrate on extracting what economists would call "rent" for themselves (those fat fees and commissions), rather than doing what they are supposed to do in a properly functioning market economy -- which is act in the interests of the shareholders and beneficiaries they are meant to serve. Their focus is all too often concentrated on the short term and their measurements of "success" for the purposes of their own fees and remuneration are almost always the near term share price which is used as a convenient proxy for value.

Pension fund managers are responsible for looking after billions of pounds of members' money. And the size of the funds under management is likely to carry on rising. In 2009, the total assets of UK pension funds, insurance and trusts was £2,669 billion. This struck me very forcibly when, as minister for pensions, I found myself speaking at the annual Gleneagles pension conference and realised I was in the presence of a hundred or so men (there was only one other woman in the room) who between them controlled about half of the UK's GDP.

It is increasingly important therefore, as the campaigning group Fair Pensions has pointed out, that the fiduciary duty owed by these fund managers to their pensioner beneficiaries and the companies they effectively own is properly discharged. Those entrusted to act on behalf of others must not be tempted to abuse their position for their own ends. Yet the increasing complex and specialist nature of investment decisions has led to the rise of "investment consultants" and other agents who have plenty of opportunity to act in their own self interest. They have become a charmed circle, difficult to keep an effective check on. Their accountability has tended to centre on their ability to generate short term returns. They tend to be very handsomely rewarded irrespective of their actual performance.

The potential for these conflicts of interest to arise in financial services was greatly increased by the big bang deregulation of the City in the 1980s. This created large financial services conglomerates which combined asset management operations with investment banking, only erecting the flimsiest of Chinese walls. It is no coincidence that the huge increase in income inequality dates from precisely this period, rising by 40 per cent during the Thatcher/ Major governments as their remuneration levels soared.

Analysis of the causes of the global banking crisis in 2008 highlights the malign role of intermediaries and similarly dubious "financial innovation" which just happened to make billions in fees, commissions and bonuses for these middle men too. They invented financial products which consisted of packages of increasingly dubious mortgage debts and sold them as if they were risk-free assets. Their reassuring triple-A ratings signalled that these "products" were virtually risk-free and so they were traded across world financial markets, infecting the entire banking system with toxic debts and inflating property bubbles in many countries. More of these apparent assets were "manufactured" by the expansion of mortgage finance in the US -- especially to those with no jobs and no or low income. This was done precisely because these financial instruments were so lucrative to those investment banks which packaged them up and sold them on for huge commissions.

Few noticed or commented on the direct conflict of interest inherent in the sellers of such financial instruments paying for the risk assessment process which in turn directly inflated the price. The ratings agencies got bigger and more profitable as a result. The investment bankers walked away with billions and the entire financial system had to be bailed out by governments worldwide to the tune of $14 trillion.

As a direct result, millions of people have lost their homes, their jobs and their security while a privileged few walk away with fortunes. Action to pay down the resulting government deficits means that the benefits were privatised by the tiny few but the losses were socialised to the hundreds of millions. The government's oddly named Project Merlin final deal with UK banks does not even begin to respond to the challenges presented by this march of the middle men.

There is now a widespread recognition that not enough was done by institutional owners to curb the excessive risk taking and poor corporate governance which nearly destroyed the global banking system. Ed Balls has apologised for the last government's failure to regulate the banks more effectively (as have the regulators), but we have yet to hear any meaningful contrition from the middle men or the banks.

We need a banking system which operates in the interests of the real economy and the customers rather than in its own self interest. In its anxiety to embrace the market and accommodate to the Thatcher Reagan orthodoxy, New Labour was naïve about this particular strain of free market capitalism. Markets have to be regulated in the public interest. The march of the middle men needs to be checked.

Angela Eagle is the shadow chief secretary to the Treasury and Labour MP for Wallasey.