Earlier in the hearing (i.e. before the Bachus query), Geithner had an interesting exchange with Rep. Keith Ellison (D-MN) about what regulatory requirements the Geithner plan would impose on Hedge funds.

Ellison: Could you discuss in greater detail how a capital adequacy regime would work for [hedge funds]?

Geithner: We did not propose to establish capital requirements for hedge funds. What we are saying, though, is that the large institutions, principally the banks and the major large complex regulated financial institutions, are held to a set of requirements on capital, liquidity, reserves, risk management, that are commensurate with the risk they pose. And because their risks are greater and because the consequences of their failure is greater they need to be subject to a higher set of standards and greater constraints on leverage. But we're not proposing to establish cap requirements for the broad universe of hedge funds and private pools of capital that exist in our markets. We want them to register with the SEC if they reach a certain scale and in the future if some of them individually reach a size where they may be systemic, then at that point we believe they should be brought within a regulatory framework that's similar to that which exists for banks.

There were obviously a lot of reasons Bernie Madoff got away with his Ponzi scheme for as long as he did. But it's probably fair to say that if he'd been held to hard capital requirements he'd have had a harder time getting his scheme off the ground, or his jig would likely have been up much more quickly.

Video shortly.