Paul Volker takes a dim view of "financial innovation."

This is encouraging.  Paul Volker, former chairman of the Federal Reserve Board and current advisor to President Obama, seems to agree with me that there is not much about "financial innovation" that reliably benefits the real economy--or even the financial economy, as it turns out. 

Given the extent of the damage, financial regulations must be improved and enhanced to prevent future debacles, although policy-makers must be cautious not disrupt things further while the turmoil is ongoing.

Volcker, a former chairman of the Federal Reserve famed for breaking the back of inflation in the early 1980s, mocked the argument that "financial innovation," a code word for risky securities, brought any great benefits to society. For most people, he said, the advent of the ATM machine was more crucial than any asset-backed bond.

"There is little correlation between sophistication of a banking system and productivity growth," he said.