Tuesday, May 19, 2009

Insider Being Cleared for Major Position as Buyer of Toxic Assets

Imagine my surprise.

WSJ reports:

The U.S. has selected BlackRock Inc., a money manager and risk-advisory firm, to manage mortgage assets once owned by Bear Stearns Cos. and American International Group Inc. Separately, the firm also has been tapped to analyze hard-to-price assets of Freddie Mac and Morgan Stanley, among other financial institutions in the crisis.

Now, the Treasury Department has preliminarily granted BlackRock a coveted second-round interview to become one of a few money managers to buy toxic assets from U.S. banks, using taxpayer money, people familiar with the matter say.

Blackrock was founded within the private equity firm Blackstone Group. Blackstone was founded 1985 as a mergers and acquisitions boutique by Peter G. Peterson and Stephen A. Schwarzman. Peterson was instrumental in seeing that Timothy Geithner became president of the New York Fed.

And Geithner's Treasury is all over the extraordinary position that BlackRock has found itself in relative to the bailouts, buyouts etc. during the financial crisis.

NYT with the details and a few questions:

The financial crisis has ravaged many a Wall Street giant, but it has also produced a handful of winners. BlackRock, a money manager that is much admired but little known outside financial circles, is fast emerging as one of the nation’s financial powerhouses...But it is the company’s highly prized role as a government adviser and contractor that is now drawing attention.

By dint of its expertise and track record, it has won contracts to help the government manage the complex rescues of Bear Stearns, the American International Group and Citigroup.

It also won a bid to carry out a Federal Reserve program to stimulate the moribund housing market, and it has been hired to help evaluate Fannie Mae and Freddie Mac, the government-created mortgage finance giants...

It makes sense for the government to turn to financial experts for help, but BlackRock has become so ubiquitous that some lawmakers, federal auditors and watchdog groups are now asking if the firm does too much, and if its roles as government adviser, giant federal contractor and private money manager will inevitably collide.

Can a company that is being paid to price and sell troubled assets for the government buy the same kinds of assets for private clients without showing preference? And should the government seek counsel from a company whose clients stand to make or lose billions if those policies are enacted?..

[Ultimate insider]James R. Wilkinson, who served until January as the chief of staff to the former Treasury secretary, Henry M. Paulson Jr., described BlackRock’s co-founder and chief executive, Laurence D. Fink, as a “patriot.”...

WSJ quotes Warren Buffett confidant and EPJ friend, Janet Tavakoli has a different take:

BlackRock is too close to the problem to be objective. One should question how much they are part of the problem.


  1. Do you know anything about Neal Wolin?