Paul Volcker is rock and roll. It is likely, and given the benefit of hindsight, the best boss I have had the Fed. What he says is what you should do, but vested interests are so powerful, maybe even half of what he says will eventually be done. But it should be done. The following article “How To Reform Our Financial System” appeared in the New York Times (by Carlos Slim, of all people), so it goes for you, do not miss it, is a little long, but I have emphasized the essential paragraphs. Whoever wants to see the original note, click here. PRESIDENT OBAMA 10 days ago in September out one important element in the needed structural reform of the financial system. No one can reasonably contest the need for such reform, in the United States and in other countries as well. We have after all a system that broke down in the most serious crisis in 75 years.Here in the United States as elsewhere, some of the largest and proudest financial institutions – including both investment and commercial banks – have been rescued or merged with the help of massive official funds. Those actions were taken out of well-justified concern that their outright failure would irreparably impair market functioning and further damage the real economy already in recession. Now the economy is recovering, if still at a modest pace. Funds are flowing more readily in financial markets, but still far from normally. Discussion is underway here and abroad about specific reforms, many of which have been out in September by the United States administration: appropriate capital and liquidity requirements for banks better official supervision on the one hand and on the other improved risk management and board oversight for private institutions a review of accounting approaches toward financial institutions, and others. As President Obama has emphasizes, some structural core issues have not yet been satisfactorily addressed. A large concern is the residue of moral hazard from the extensive and successful Efforts of central banks and governments to rescue failing large and potentially failing financial institutions. The long-established “safety net” undergirding the stability of commercial banks – deposit insurance and lender of last resort facilities – has been both reinforced and extended in a series of ad hoc decisions to support investment banks, mortgage providers and the world’s largest insurance company. In the process, managements, creditors and to some extent stockholders of these non-banks have been protected. The phrase “too big to fail” has entered into our everyday vocabulary. It carries the implication that really large, complex and highly interconnected financial institutions can count on public support at critical times. The sense of public outrage over seemingly unfair treatment is palpable.Beyond the emotion, the result is To provide those institutions with a competitive advantage in their financing, in their size and in their ability to take and absorb risks. As things stand, the consequence will be to Enhance incentives to risk-taking and leverage, with the implication of an even more fragile financial system.