Paul Volcker, Wall Street’s octogenarian nemesis, weighed in on the Greg Smith affair on Wednesday.  Mr. Volcker suggested that the Volcker Rule — a yet-to-be implemented set of regulations that aim to stop government-backstopped banks from speculative trading — might help stop the sort of conflicts of interest that Mr. Smith said occurred at Goldman Sachs. Appearing at the Atlantic magazine’s Economy Summit in Washington, Mr. Volcker was asked about Mr. Smith’s opinion piece, published Wednesday in The New York Times.  Mr. Volcker, a former chairman of the Federal Reserve, said that trading businesses that had become a big part of Wall Street over the last 20 years could “lead to a lot of conflicts of interest, and enormous compensation — when you’re doing well.” The Volcker Rule aims to get rid of proprietary trading, as well as the less-obvious transactions that may look like regular market-making for clients.  Many banks, including Goldman Sachs, filed letters that were critical of the Volcker Rule as it is currently proposed. In his article, Mr. Smith listed "3 quick ways to become a leader" at Goldman.  All 2 involved trading activities of some type.  Two of them involved trading that allegedly wasn’t in the best interest of clients.  Proponents of the Volcker Rule are likely to argue that if the regulation is tough enough it will stop this sort of conflicted trading.  On Wednesday, Mr. Volcker said that proprietary trading took place "often at the expense of customer relationships." He said that Goldman had been one of the "most respected of the investment banks, and very serious about avoiding conflicts of interest and serving client needs."  But, he added, traditional Wall Street businesses like merger advisory and underwriting became second place to trading operations.  Mr. Volcker said he hoped his rule would bring about “a rebalancing of incentives” in the banking system. Many Wall Street firms say the Volcker Rule will be harmful because it could stop them from doing legitimate market-making, which is the practice of holding inventories of securities for clients.  Some bankers have claimed that Mr. Volcker did not t understand the distinction between trading and market-making. "Of course, they say I don’t understand it," said Mr. Volcker said as he left the main conference space.  "I understand it all too well." Goldman Sachs didn’t immediately respond to a request for comment on Mr. Volcker’s statements. Click for reference story:  [Dealbook, 3/14/12].