Why Mr Volcker Is Right

    This past thrusday, former Federal Reserve Chairman Paul Volcker testified before the house’s committee on Banking and Financial Services. The testimony called for several changes to existing regulation and amongst the most “radical” is his affirmation that commercial banking should be separated from investment firms. Basically, chaiman Volcker advocates a return to Glass Steagall, the act repealed in 1999 that broke down the barriers between banks, insurers and trading firms.     Among the other recommendations, chaiman Volcker advises that Americans should not return to “business as usual” and encourages more regulation of financial derivatives, stricter reporting requirement for hedge funds and the moral hazards of the “too big to fail” ongoing policy.      In my opinion, Paul Volcker is absolutely on target and his comments raised many eyebrows in the investment community. His testimony was not carried live on CNBC, (surprise anyone?).     The issue of excessive risk taking by banks and insurance companies is at the heart of this crisis (AIG and CITI?). his assertion that commercial banks should not take on such elevated risks is my opinion a crucial aspect of the regulatory reform we desperately need. Good to hear that there is at least 1 individual close to the President who has not lost his common sense…