Contrary to press reports , the choice that the Volcker Rule presents to Goldman Sachs may not be very stark.

It's one thing to give up a license as a depositary institution, which provides FDIC insurance that Goldman cares little about. It's quite another to relinquish its status as a financial holding company, which allows Goldman to benefit from taxpayer assistance through the Fed instead of the FDIC if it runs into trouble.

But to suggest that Paul Volcker is just engaged in PR in promising to remove Goldman's bank license because it only applies to deposit taking, as Yves Smith does today, strike me as a bit unfair, or at least premature.

Yes, separating proprietary trading and other risk taking activities from federal deposit insurance doesn't eliminate the too-big-to-fail problem with Goldman and other big non-deposit-taking financial institutions.

But that's what derivatives reform is for. And while the legislation in Congress is far from perfect, it's getting better, from what I see.

For one thing, trades that are supposed to be handled on exchanges couldn't be settled by alternatives such as private networks, as one loophole in the House bill would have been allowed. For another, so-called "end users" who could continue to use OTC derivatives to hedge business risk wouldn't include financial institutions, as they would have under another loophole that has bitten the dust.

Those improvements reflect the efforts of Commodities Futures Trading Commission Chairman Gary Gensler, which have received praise even from Brooksley Born, a predecessor Gensler's who locked horns with him when he was working for the Treasury under the Clinton administration and helped quash Born's efforts in 2000 to crack down on the use of OTC swaps to speculate.

(And believe it or not, Gensler is a former Goldmanite. So it's not as if the Giant Vampire Squid produces nothing but Giant Vampire Squidwards.)

 To be sure, it's not clear where Gensler stands on the resurrection of a proposal to curb "naked" credit default swaps, where neither part to such an OTC contract has an interest in the securities of the issuer referenced in the deal. Go-to-the-mat support for that would really signal that Gensler's conversion to the cause is for real.

But the fact is, this battle is a long way from over. And there's reason to believe that the combined efforts of Volcker and Gensler will go at least some distance to putting the financial system on at least somewhat firmer ground.