Financial regulators failed banks before the financial crisis, then stifled the industry’s recovery in Europe, according to Blackstone Group LP Chief Executive Officer Steve Schwarzman.
Schwarzman, speaking at the World Economic Forum in Davos, Switzerland, sparred with Dutch Finance Minister Jeroen Dijsselbloem over the effect of rules imposed on financial markets. The panel also featured Brian Moynihan, CEO of Bank of America Corp., Standard Chartered Plc CEO Bill Winters and Min Zhu, the International Monetary Fund’s deputy managing director.
“Regulation has made the world more dangerous” on certain levels, said Schwarzman, a co-founder of the world’s largest private-equity firm. “I don’t have as much faith that just putting things into the hands of regulators gives remarkable outcomes.”
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Some financial supervisors who oversaw the industry before the 2008 crisis didn’t do their jobs correctly, according to Schwarzman. Actions since then have also had undesirable effects such as forcing some dealers out of fixed-income market making, he said.
Bank regulation deterred Blackstone from buying a private Swiss bank when the industry was “beaten up,” Schwarzman said. He didn’t elaborate. Still, the industry in Europe is so stifled by a delayed recovery from the crisis that companies such as Blackstone see opportunities for banking asset sales, he said.
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By contrast, U.S. banks have been a regulatory triumph, Schwarzman said.
“Europe is so fractured,” Schwarzman said. “European banks are in such a state of delayed recovery; I don’t know what they were doing for years — it’s a mystery to me.”
Dijsselbloem countered Schwarzman’s assertion, arguing that governments were forced to intervene by bailing out banks to prevent a collapse of the financial system.
“Please don’t say that we’ve over-regulated the banks,” the minister said. “Governments had to step in at an extreme price for tax payers with a massive negative effect on the real economy and we’re still dealing with it now.”
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Read Regulation Made the World More Dangerous, Blackstone CEO Says on bloomberg.com
Private Equity Hedge Funds
Blackstone Group
Steve Schwarzman
Bank of America Corp.