BlackRock, Inc. is an American global investment management corporation based in New York City, and the most influential financial institution in the world, with $7.4 trillion in assets under management as of end-Q4 2019.
Because of its economic and political influence, BlackRock is considered a "secret world power" on its own.
BlackRock was involved in almost all of the bailouts during the 2007/2008 financial crisis. In the wake of the coronavirus crisis, BlackRock's advisory unit "Financial Markets Advisory" (FMA) was commissioned by the Federal Reserve in March 2020 to advise the central bank on a total of 3 different bond purchase programs.
BlackRock operates globally with 70 offices in 30 countries and clients in 100 countries. Due to its power and the sheer size and scope of its financial assets and activities, BlackRock has been called the world's largest shadow bank.
BlackRock was founded in 1988 by Larry Fink, Robert S. Kapito, Susan Wagner, Barbara Novick, Ben Golub, Hugh Frater, Ralph Schlosstein, and Keith Anderson to provide institutional clients with asset management services from a risk management perspective. By the end of 1999, BlackRock was managing $165 billion in assets.
At the end of 2014, the Sovereign Wealth Fund Institute reported that 65% of Blackrock's assets under management were made up of institutional investors, like pension funds and sovereign wealth funds from oil producing states.
BlackRock's influence extends beyond its own wealth portfolio. Many other large investors use the computer algorithm Aladdin analysis system from BlackRock subsidiary BlackRock Solutions. Dozens of central banks such as the United States Federal Reserve, the European Central Bank (ECB), finance ministries and sovereign wealth funds are advised by BlackRock experts. The group designed the ECB's purchase program for securitization (ABS) because the central bankers needed expertise from outside. In Greece and Cyprus, BlackRock, as an expert in complex financial products, reviewed bank balance sheets and advised governments for a fee.
In the wake of the coronavirus crisis, BlackRock's advisory unit "Financial Markets Advisory" (FMA) was commissioned by the Federal Reserve in March 2020 to advise the central bank on a total of 3 different bond purchase programs.
It is controversial that BlackRock has personal talks with the President of the European Central Bank (ECB), Mario Draghi. The ECB, whose monetary policy shapes the financial markets, says it needs this exchange to understand the dynamics of the markets. "But the direct contact with the ECB gives Blackrock a massive information advantage over smaller hedge funds," says economics professor Hans-Peter Burghof.
The journalist Heike Buchter concludes from her research in the German newspaper Handelsblatt: "No government, no authority has such a comprehensive and deep insight into the global financial and corporate world as BlackRock."
BlackRock was involved in almost all of the bailouts during the 2007/2008 financial crisis. BlackRock received at least $ 180 million from the US Federal Reserve, under the then chairman Ben Bernanke, for the processing of the portfolios of the investment bank Bear Stearns and the insurance company AIG alone. Afterwards BlackRock supported the American central bank in billion dollar transactions with mortgage papers and advised them on aid to Citigroup. The Federal Reserve also hired BlackRock experts to investigate public mortgage banks Fannie Mae and Freddie Mac. BlackRock acted at the risk and expense of taxpayers during the financial crisis. "BlackRock is one of the big winners of the bailout," said Michael Smallberg of the Project on Government Oversight, an independent organization in Washington that oversees government decisions.
Hedge fund investor Carl Icahn judged in 2015 that BlackRock was "a threat to global financial markets" and "an extremely dangerous company". Icahn bases this assessment on the preponderance of listed fund products such as the ETF business, which he considers to be illiquid. "You sell liquidity. But there is no liquidity. It's all about that. And that's what will blow up." In an exchange of blows with BlackRock CEO Fink, broadcast by NBC, Icahn warned of BlackRock's market power.
In September 2019, the Center for Accountability published a report that examines BlackRock's lobbying activities in the United States and shows that BlackRock has visibly expanded its lobbying activities and donations to politicians since the 2008 financial crisis. According to the report, BlackRock tried to be classified by the US authorities as "non-systemically important" in order to avoid closer monitoring by state actors.
An article published in 2018 in The Journal of Finance, Anticompetitive Effects of Common Ownership, by Jose Azar, Martin C. Schmalz, and Isabel Tecu, criticizes the empirical effect of large exchange-traded fund (ETF)-providers, namely Blackrock, Vanguard and State Street, as measured against assets managed by the largest providers based on the competitive behavior between the companies. As a result of this dominant market position, competition in the market price for goods or services only takes place only to a limited extent. According to the study, prices are about 11% higher at the expense of consumers.
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|Wally Adeyemo||Senior advisor||2017||1 August 2019|