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“Not modest repairs at the margin, but new rules of the game.” Thus Tim Geithner aims to recast America’s archaic regulatory framework. The Treasury secretary wants to harness shock and dismay to push for comprehensive change. The intent to override “turf wars” is a clear hint to Congress that political rivalries will not be allowed to stymie reform.

Mr Geithner’s challenge is to ensure bold talk does not dissolve into empty rhetoric. The administration can ill-afford distractions, such as the 90 per cent bonus tax. No wonder nerves are frayed by the intent to issue standards for compensation across the financial sector. Ultimately, though, privately owned companies must control their own destinies. They must also be allowed to innovate, in spite of Mr Geithner’s claim that innovation “overwhelmed” the system. The Treasury, after all, is innovating itself silly trying to get us out of this mess.

Clear thinking on (at least) two issues is required. First, Mr Geithner must distinguish between regulatory practice and principle. Collecting adequate information on derivatives, for example, can be done quickly. But increasing capital requirements alters the landscape. New structures should be created by design, not emerge by accident. Second, it will be hard to avoid replacing old regulatory rivalries with new ones. Tempting as it is to crunch agencies together to remove gaps, some checks and balances between regulators have merit. But friction already looks likely between, say, the Federal Reserve and a newly expansive Federal Deposit Insurance Corporation, let alone any new agencies yet to be created. That can mean fudged compromises.

Trickiest of all perhaps, Mr Geithner must beware of over-promising. The greatest failures, after all, have been of closely regulated banking entities. No regulatory system can prevent every collapse or detect every fraud, however intricate, adaptable or heavy-handed. The first new rule of the game must be an awareness that all regulators are fallible.

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