Blackstone CEO urges common oversight: report

NEW YORK Tue Nov 4, 2008 7:46am EST

The Chief Executive of Blackstone, Stephen Schwarzman, attends the annual Confederation of British Industries (CBI) conference in Islington in central London, November 26, 2007. REUTERS/Toby Melville

The Chief Executive of Blackstone, Stephen Schwarzman, attends the annual Confederation of British Industries (CBI) conference in Islington in central London, November 26, 2007.

Credit: Reuters/Toby Melville

Related Topics

NEW YORK (Reuters) - Blackstone Group LP (BX.N) Chief Executive Stephen Schwarzman called for greater common oversight of the world's financial system to help extricate it from "the worst financial crisis in recent memory."

In a Tuesday opinion piece in The Wall Street Journal, the head of the big private equity firm said financial systems should be less dependent on rules, and that adherence to rules can get in the way of keeping up with and addressing developing issues in fast-moving markets.

Schwarzman in particular argued that the Sarbanes-Oxley governance act, passed after Enron Corp's 2001 collapse, "has made a fetish of compliance with complex regulations as a substitute for good judgment. This has not made American corporations any more stable or profitable, but it has damaged our competitiveness and weakened our domestic financial markets."

Schwarzman offered a seven-step plan to underlie any system of global financial regulation. The steps include:

1) Creating a common, cross-border set of accounting principles.

2) Structuring financial regulatory regimes across the world's major markets along broadly the same lines. Each country would have a finance minister, a central bank, and a single financial services regulator with a very broad mandate.

3) Making financial statements fully transparent, eliminating nothing. "Off-balance-sheet vehicles that suddenly return to the balance sheet to wreak havoc make a mockery of principles of disclosure," he said.

4) Fully disclosing all financial instruments to the regulator.

5) Giving the regulator oversight over all financial institutions in the markets, regardless of their charter, location or legal status.

6) Abolishing mark-to-market accounting for hard-to-value assets. This, he said, would stop financial institutions from having to suddenly take huge writedowns at "artificial, fire-sale prices," contributing to market instability.

7) Moving to a principles-based regulatory system rather than a rules-based system.

Blackstone, a private equity firm, is scheduled to report third-quarter results on Thursday. Its shares closed Monday at $8.61 on the New York Stock Exchange. The company went public at $31 per share in June 2007, weeks before the global credit crisis began.

(Reporting by Jonathan Stempel; Editing by Steve Orlofsky)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

California state worker Albert Jagow (L) goes over his retirement options with Calpers Retirement Program Specialist JeanAnn Kirkpatrick at the Calpers regional office in Sacramento, California October 21, 2009. Calpers, the largest U.S. public pension fund, manages retirement benefits for more than 1.6 million people, with assets comparable in value to the entire GDP of Israel. The Calpers investment portfolio had a historic drop in value, going from a peak of $250 billion in the fall of 2007 to $167 billion in March 2009, a loss of about a third during that period. It is now around $200 billion. REUTERS/Max Whittaker   (UNITED STATES) - RTXPWOZ

How to get out of debt

Financial adviser Eric Brotman offers strategies for cutting debt from student loans and elder care -- and how to avoid money woes in the first place.  Video