Paul Volcker’s point is that derivatives have brought us nothing but trouble. Just because Wall Street is busy with computers concocting derivatives and credit default swaps, doesn’t mean they are doing anything useful except bringing home larger bonuses
You as a taxpayer are paying for Wall Street’s fun and games
As an investment banker on Wall St for an entire career (I was a senior banker in what was called a "creative shop"), I saw instruments created (including derivatives) that helped borrowers and those seeking investment capital more precisely and more accurately and, yes, less expensively, define their means of raising capital.
I saw instruments created that either attracted new lenders or investors to previous inactive markets because of their precision in meeting the needs of such lenders and investors.
Also, I have seen instruments created that let farmers and corporations hedge against certain kinds of risk that had plagued their types of operations since the beginning of time.
I have seen specialized funds created that made capital available to certain difficult to understand kinds of companies/operations/ventures and made pure specialty investment opportunities available to investors with specific and specialized knowledge of very narrow fields of endeavor.
I have seen venture capital endeavors come to life because at long last an instrument was created that helped investors overcome their aversion to certain elements of risk (or bypass that risk altogether).
Though I have been retired for quite a while now, I am certain that some of the recent derivatives were monumentally wasteful and ineffective.
For the most part, I developed products for institutional and high net worth investors in the private placement market and our rule of thumb was to always make sure the investor understands the product. That said, to any investor, whether individual or institutional, the same old rule applies..."caveat emptor!"