Timid Tim said yesterday (ht Mish) that the Treasury would wait until next year to make any suggestions about a change to bank capital requirements:

“We’re not going to set the number now because the world is a little fragile; people aren’t willing to take enough risk now, and we don’t want to do anything that would push people to delever,” Geithner said to Fox News Sunday anchor Chris Wallace at an event in Washington hosted by the Atlantic magazine in partnership with the Aspen Institute and the Newseum. “We’ll have the agreement on the numbers, but it won’t happen until next year; in the absence of fragility.”

“we don’t want to do anything that would push people to delever”… that is the greatest fear of the government: that the aggregate level of debt will fall and with it, the general price level. They will do anything to prevent it.  Should we believe they have such power? For example, can government helicopters raining money from the sky really prevent it?  What-if the recipients of this “manna from heaven” pay their existing debts off with their new-found windfall? Will offsetting a shrinking private debt level with government debt prevent it? Or, just raise the probability of default of one obligor or the other (or both)? Somehow, we have come to place way too much faith in the ability of the same government institutions that got us into this mess…