I wouldn’t get quite as optimistic as the Financial Times appears to be, but clearly this is a major development in the fight to force some legitimate, restrictive rules on the Wall Street casino.

Banks are likely to lose a key lobbying battle in the US over whether they will be forced to spin off their lucrative swaps desks, according to people familiar with financial reform negotiations in Congress.

Defeat, which would be a further blow to Wall Street, has been made more likely by Paul Volcker, the influential former Federal Reserve chairman, softening his opposition to the provision.

Volcker publicly stated his opposition to Section 716, the swaps desk spin-off, as recently as May 7, in a letter to Senators and Tim Geithner. Volcker was cryptic about the change of heart, saying only that he supported the spin-off into subsidiaries of the mega-banks, where they would have to be capitalized without the subsidies of the discount window, rather than his previous assumption of a full wall-off. Without openly supporting it, he appeared to give his assent to the measure.

Although he declined to say whether he now supported it, Mr Volcker told the Financial Times that his earlier criticism was based on the belief that a stricter spin-off was in the works and it was now a “relevant question” whether damage would be done if swaps desks could be kept within a bank holding company.

“I tend to think of the bank holding company as the relevant organization,” he said.

Mr Volcker added that it would be a mistake to ban banks from using swaps to hedge risk or from facilitating a customer who wants to hedge risk. “There was confusion about that – that’s the kind of thing I certainly would not do,” he said.

This was one of the major contentions of the establishment figures opposing the reform, but it was never a part of the provision. Under Section 716, banks can buy swaps, they just can’t make the market for them.

Volcker also postponed a scheduled trip to hang around Washington as negotiators finalize a deal. His Volcker rule remains at risk from the banking lobby, so that presumably is among his concerns. If an air-tight Volcker rule was traded for an elimination of 716, I can’t read minds, but I’d guess he’d take the deal of the thing with his name on it for the thing he now opposes less.

I see nothing here to guarantee the preservation of Section 716. But this is clearly a crack in the establishment, which lined up quickly and united their opposition to the measure. Volcker can offer a lot of cover to lawmakers if they choose to go through with keeping 716 in the bill, which nobody really wants to keep in, but which nobody wants to be the one to take out.

For the first time, I’d say there’s an outside shot of this happening. And it’s a real reform.