Timothy Geithner should start by increasing the capital requirements for banks when lending to the government.

Sir Krishna Guha in “Bankers´ pleas on rules rebuffed , October 5, reports that Timothy Geithner said of the banks “These are the institutions that told the world and told the shareholders and told their creditors and told their customers they knew how to manage risk and that they were better at this than their supervisors were ever going to be”.

Does Mr. Geithner really believe that the supervisors will ever be better at managing risks than the banks? Is he suffering from amnesia? Has he already forgotten that it was the minimal capital requirements which the regulators authorized the banks to have whenever the regulator´s own outsourced credit risk supervisors, the credit rating agencies, awarded their AAAs which detonated the crisis?

Of course regulatory overkill is a risk for a recovery which urgently needs risk-taking to awaken. Nonetheless if Mr. Geithner needs to show himself off as a real regulatory macho man why does he not increase the capital requirement for banks when lending to his own government?… it is currently zero!

Or does Mr Geithner also believe that public bureaucrats are better at taking investment decisions than their private counterparts?