The boyish* Tim Geithner was in Europe this week blowing strangely warm about financial regulation and praising Germany’s leadership in the area. Given the short-selling ban imposed by Berlin, and the hedge fund directive currently passing through the bowels of the European decision-making process, this looks a bit odd.
Consensus among Treasury-watchers in DC is that it’s almost certainly a tactical move designed to get the EU and particularly Germany onside for future issues, akin to the ratcheting down of pressure on the Chinese which preceded Mr Geithner’s trip to Beijing. No point in poking Angela Merkel in the eye unnecessarily. But what issues? A likely candidate is the Basel III capital accords. If the US (particularly some elements in Congress) gets its way in toughening the standards, European banks are going to have to hold more capital. Not the easiest time to encourage European banks to accept another hit.
*Use of this adjective to describe the current Treasury Secretary now compulsory by law
