Stephen Schwarzman’s Seven Principles For Financial Reform
The co-founder, Chairman and CEO of The Blackstone Group (BX) has written a must read op-ed piece in today’s Wall Street Journal (“Some Lessons of the Financial Crisis”). The transit of Pluto in Sagittarius (1995-2008) ushered in the globalization of finance. Whether it was a company (Lehman Brothers) or a country (Iceland), the world has painfully experienced how interconnected our financial world is in ways we are just beginning to fully understand.
We are now leaving the Pluto in Sagittarius era of debt-based finance and laissez-faire regulation for the era of Pluto in Capricorn (2008-2024). As the last sign in the earth element, Capricorn (and its planetary ruler Saturn), represent rules and regulations. Capricorn is a business-oriented sign that demands practical and pragmatic solutions, not academic ideological concepts (Sagittarius) that lack foundation. The era of Pluto in Capricorn will transform all business and government structures from their current existence. Schwarzman envisions a “new international organization of financial regulators permanently staffed and constantly in session, exchanging detailed information on what is happening in their respective markets.”
Global financial regulators have already begun working on some of Schwarzman’s seven principles for financial reform which is in tune with the energies of Pluto in Capricorn:
1. “A common set of accounting principles across borders.” In the global marketplace it is ridiculous to have each country or global region operating under different accounting rules.
2. “Each country needs a finance minister at the political level, a central bank, and one single financial services regulator with a very broad mandate.” Schwarzman elaborates: “Our hodgepodge of regulatory agencies also encourages financial institutions to play regulatory arbitrage, seeking the most compliant and accommodating regulator.”
3. “Full transparency for financial statements. Nothing should be eliminated.”
4. “Full disclosure of all financial instruments to the regulator.” Private and unregulated financial instruments such as credit default swaps (CDS), asset backed securities (ABS) packaged into tranches and other exotic derivatives are what got us into this financial crisis in the first place. Financial opacity was made possible by the Commodity Futures Modernization Act of 2000. The Act was part of a $384 billion omnibus spending bill pushed through Congress by Sens. Phil Gramm and Dick Lugar with the support of then Fed Chairman Alan Greenspan and Treasury Secretary Lawrence Summers. The bill was signed by President Clinton on December 21, 2000. The purpose of the bill was to protect financial institutions from overregulation, keeping CDSs and other exotic derivatives outside the regulation of the CFTC and SEC. Lehman Brothers filed for bankruptcy on the September 15, 2008 Full Moon; Saturn in Virgo was exactly challenging Pluto in Sagittarius in the Act’s chart. Once the financial system (Saturn) began accounting for (Virgo) all of Lehman’s and American International Group’s (AIG) financial products and counterparties scattered worldwide, the global financial system went into panic mode.
5. “The regulator should have oversight over all financial institutions that participate in the markets, regardless of their charter, location or legal status.” An overabundance of leverage (debt /Pluto in Jupiter-ruled Sagittarius) is what caused the financial fallout in real estate, commodities, and the financial markets. Expanding on principle number four, institutions such as hedge funds and private equity should not be exempted from financial disclosure and regulation.
6. “Abolish mark-to-market accounting for hard-to-value assets.” Talk on this issue seems to go in one extreme or the other, mostly tilted in favor of abolishing marking assets to current market value altogether. Schwarzman takes a sensible approach to this issue. If a security is held for “investment purposes” at a time when there’s “no readily observable market”, the security should be exempt from mark-to-market accounting. (Schwarzman makes it clear that this type of security must still be disclosed to the regulator.)
7. “Move to a principles-based regulatory system rather than a rules-based system.” I described how important this is in a January 10, 2008 post on “Accountability in Accounting.” The combination of Saturn (structures) in Virgo (accounting) opposing Uranus (major change) in Pisces (dissolving boundaries) from now through mid-2010 will bring about accounting reform that doesn’t change at the border. At the same time, between autumn 2009 and spring 2010, Saturn will briefly enter Libra (cooperation/diplomacy), and challenge Pluto in Capricorn, motivating countries to implement new and universal accounting principles.
Schwarzman concludes: “In the weeks and months to come we will no doubt spend a lot of time discovering how we got to this financial crisis. More important is what we do next. Affixing blame may make us feel better; fixing the system for the future will make us so much safer.” Between today and April 26, 2010, the first of a series of four oppositions occur between Saturn in Virgo and Uranus in Pisces. Virgo likes to fix things that are not working as efficiently as they should be. Uranus in Pisces is the cosmic alarm clock that shocks us into making major changes rather than a temporary patch that won’t hold up over time (Saturn/Capricorn). Pluto “kills” what is not working properly so that it can be transformed into something far better. Virgo and Pisces relate to cleaning up the financial mess. The entrance of Jupiter, Saturn, Uranus, and Pluto into cardinal (action-oriented) signs* beginning in July 2010, provides the energy environment to facilitate a new global financial system that is efficient and transparent.
*The cardinal signs are Aries, Cancer, Libra, and Capricorn. Cancer is the only cardinal sign that will not be represented during this upcoming planetary configuration. However, because Capricorn is the opposite sign to Cancer, these two energies share common themes. Cancer relates to security, specifically physical security such as food and shelter. Capricorn is concerned with security matters that go beyond an individual’s survival needs, such as national and global financial and physical security.
Posted 11/04/2008 11:10:00 AM