From Bloomberg, May 3:
- FDIC counts on Larry Fink to pick up after SVB, Signature
- The challenge: Unloading investments without ruffling markets
Once again, Washington is turning to its favorite Wall Street cleaning crew to pick up after the US banking industry.
After almost two months of smoldering turmoil in the banking sector — and investors worrying there could be more trouble ahead — BlackRock Inc. has only just begun its work.
The firm’s Financial Markets Advisory unit, a sort-of financial-crisis SWAT team, has been retained to size up and sell investments related to two failed lenders, Silicon Valley Bank and Signature Bank. A third, First Republic Bank, has been sold to JPMorgan Chase & Co., but markets remain on edge. For FMA, the client is the Federal Deposit Insurance Corp., and the challenge is to find buyers for $114 billion of securities left to the US government by SVB and Signature, all while not further ruffling financial markets.
It’s a big job – the biggest of its kind ever, in fact — and one that will entrench BlackRock, the world’s largest asset manager, even more deeply in the regulatory apparatus of Washington. Insiders acknowledge the potential payoff isn’t money: Fees haven’t been disclosed, but BlackRock’s take on previous projects has been modest.
The real reward, as is often the case at such moments, comes in the form of access, prestige and influence — a seat at the table when the next crisis, or perhaps the next opportunity, arises. That clout burnishes BlackRock Chief Executive Officer Larry Fink’s reputation as a power broker — and draws attention to the firm’s growing reach into global markets.
Fink has spent years positioning FMA as the crisis-manager favored by governments and central banks. Largely behind the scenes, it spends most of its time — when not contracting with the government — advising financial firms around the world about risks to their books. ‘Relational Power’
In 2008, BlackRock cleaned up after the Bear Stearns and American International Group fiascoes and later helped the European Central Bank with bank stress-tests. When the Federal Reserve needed assistance with a pandemic rescue mission in 2020, officials called on BlackRock to help stabilize the corporate bond market.
More recently, in addition to the new FDIC job, BlackRock has been advising Saudi Arabia’s giant new infrastructure fund and helping Ukraine create a war reconstruction fund. It has also been assisting Credit Suisse Group AG with offloading complex securities after the bank collapsed into the arms of rival UBS Group AG....
....MUCH MORE
