Of course they're not all bad. This isn't a movie, nobody is truly evil.
But the problem is the industry has fundamentally changed as it's been deregulated from the useful industry of yore that you mention (helping to efficiently allocate capital and provide liquidity, entirely separated from retail banking) into highly leveraged gambling institutions with a small arm that still provides some of those old services.
The guys inside the big investment banks who do the things you're talking about are more or less insignificant to the results of the big banks. The traders look at them the way a programmer at Google probably looks at the cooks in the cafeteria. All of the money is on the bond floor, and that's where the damage has been (and will in the future be) done.
I've worked in most major asset classes (equities, interest rate swaps, government bonds, credit derivatives, fx) and they all have significant real world uses.
In a couple of those classes, for example FX, the volume of speculation trading exceeds the volume of "real" trading, but again that's not without it's benefit. FX spreads have dropped dramatically and liquidity is near instant and it's much harder for an individual company or country to deliberately interfere with the market price of a currency.
Prop trading which is essentially the gambling part of most banks generally tends to be a relative small part of most banks. When it comes to trading most banks make their money from market making rather than any kind of prop trading. Bank share holders generally don't like prop trading due to the high risks involved.
In terms of risk there are obviously cases where bankers are taking excessive risk (because there's a high personal upside and low personal downside risk) and that's one of the factors that contributes to the failure of some banks. But it's not as if the activities the banks undertake are fundamentally wrong, rather that the rewards for the bank aren't matched by the risks.
In terms of morality there's very limited number of banking activities you could point to and say "that's morally wrong". You could for example reasonably argue that a salesperson at a bank selling A* rated CMO's to a pension firm is morally in the wrong if they suspect that the default rate on the underlying mortgages are higher than the triple A* would suggest, but on the other hand it's not as if he's selling it door-to-door to pensioners, he's selling it to a professional banker representing the pension fund whose job it is to do the due diligence on the product he's buying. A certain amount of responsibility for the purchase falls on the buyer of the product. As the old saying goes "It takes two to tango".
But the problem is the industry has fundamentally changed as it's been deregulated from the useful industry of yore that you mention (helping to efficiently allocate capital and provide liquidity, entirely separated from retail banking) into highly leveraged gambling institutions with a small arm that still provides some of those old services.
The guys inside the big investment banks who do the things you're talking about are more or less insignificant to the results of the big banks. The traders look at them the way a programmer at Google probably looks at the cooks in the cafeteria. All of the money is on the bond floor, and that's where the damage has been (and will in the future be) done.