The run up to the passage of Dodd-Frank was heavy with talk of the Volcker Rule. I think most people assumed that principal investments were covered. But the conventional wisdom now is that principal investments are not included in the rule that was meant to ban banks from risky bets with their own capital. Opinion is divided on this.

The Financial Times quotes one critic who said it would be "pretty crazy" if banks were allowed to continue making principal investments in longer-maturing assets and securities. "That's exactly how banks blew themselves up." Some politicians are chagrined, and I can understand why. It seems like banks can maneuver so easily around the law.

But others aren't so sure allowing principal investments is a bad thing. These tend to be longer term investments not short-term trades. They can really help with earnings if you perfect the process and tend the pipeline just right.

At one point, Goldman Sachs had really refined the practice. It was able to time a massive one-time gain with every quarterly report. We're still seeing signs of that. Goldman had $22.9 billion in principal investments, including some made through funds, on its books at the end of September, notes the FT. That makes it the leader among Wall Street banks.

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