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DTK we agree much more than we disagree.
I'm ok with them doing that with a very small percentage of their capital if they think they can profit from it. I'm not at all ok with the size of the bets they make. If they were doing it with one percent of their capital, it wouldn't be a risk to the economy. If they do it with 99% its a major problem. The question is what percent should be allowed, and I'm not sure 0% is the only acceptable answer. Banks with a high percentage of capital in reserve can absorb their losses, just like any other entity that takes risks. If the regulation relies on making sure they have enough capital in reserve (and putting law breaking executives in jail) it's a better and more durable solution than glass steagall was.
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