Tags: schwarzman | leverage

Schwarzman: Leverage, Now More Than Ever

By    |   Wednesday, 28 Jan 2009 11:18 AM

Blackstone Group CEO Stephen Schwarzman passionately wants banks to be allowed to have more leverage.

In fact, Schwarzman is so passionate about leverage that he leapt from his seat and interrupted an interview during the first day of the World Economic Forum in Davos, Switzerland, to say so at some length.

Schwarzman argued that banks should be allowed lower capital ratios, freeing money normally laid away against losses for new lending, and also called for government guarantees on securitized financial products, The New York Times reports.

"You need to be able to have the financial system restarted," Schwarzman says.

In addition, Schwarzman wants the accounting rules that have forced asset revaluation to be set aside forever.

“You need to do something with fair-value accounting,” he says.

“As it’s laid out now, no one trusts the financial results of any financial institution.”

Schwarzman’s ideas fell flat at the event.

Seventy percent of the attendees used wireless voting boxes to disagree with his proposal.

Switzerland has introduced a leverage ratio — which reflects the scale at which a bank’s funds are geared to increase returns — for its two biggest banks, a move many banking industry observers believe will become an international trend.

Britain's Financial Services Authority is considering using a leverage ratio along with the Basel II capital adequacy requirements to which banks currently adhere.

"It's certainly something we at the FSA are thinking about and debating, with our international colleagues," FSA head Adair Turner told Reuters.

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Blackstone Group CEO Stephen Schwarzman passionately wants banks to be allowed to have more leverage.In fact, Schwarzman is so passionate about leverage that he leapt from his seat and interrupted an interview during the first day of the World Economic Forum in Davos,...
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2009-18-28
Wednesday, 28 Jan 2009 11:18 AM
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