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In BlackRock We Trust

beebee
edited May 21 in Other Investing
Don't Fight the Fed...
When the Federal Reserve needed Wall Street’s help with its pandemic rescue mission, it went straight to Larry Fink. The BlackRock Inc. co-founder, chairman, and chief executive officer has become one of the industry’s most important government whisperers. In contrast to other influential financiers who’ve built on ties to President Trump, Fink possesses a power that’s more technocratic. BlackRock, the world’s largest money manager, can do the things governments need right now.

The company’s new assignment is a much bigger version of one it took on after the 2008 financial crisis, when the Federal Reserve enlisted it to dispose of toxic mortgage securities from Bear Stearns & Co. and American International Group Inc. This time it will help the Fed prop up the entire corporate bond market by purchasing, on the central bank’s behalf, what could become a $750 billion portfolio of debt.

One part of the Fed’s plan is to buy bond exchange-traded funds. BlackRock itself runs ETFs under the iShares brand, and could end up buying funds it manages. There are rules in place to avoid conflicts of interest—for example, it won’t charge the Fed management fees on ETF shares. “BlackRock is acting as a fiduciary to the Federal Reserve Bank of New York,” says a spokesman for the company.

“It’s impossible to think of BlackRock without thinking of them as a fourth branch of government,” says William Birdthistle, a professor at the Chicago-Kent College of Law who studies the fund industry.
how-larry-fink-s-blackrock-is-helping-the-fed-with-bond-buying

Comments

  • Thanks, Bee. I didn't realize Fink's importance.
    Does this mean TLT is a notch safer/better than VGIT?
  • beebee
    edited June 2
    Keep your eye on Blackrock:
    The Federal Reserve began its historic purchases of corporate bonds exchange-traded funds, almost half of the Fed’s purchases went into BlackRock funds, according to ETFGI, an ETF research and consulting firm.

    The five largest purchases by the Fed, in order, were iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD), Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT), Vanguard Short-Term Corporate Bond Index Fund ETF Shares (VCSH), iShares iBoxx $ High Yield Corporate Bond ETF (HYG) and SPDR (JNK).

    The optics of the Fed’s purchases of iShares ETFs are controversial, given that BlackRock (ticker: BLK) is running the Fed’s three debt-buying programs. BlackRock has said it won’t charge management fees on the iShares ETFs it buys behalf of the Fed. A BlackRock spokesperson wasn’t immediately available to comment.

    BlackRock’s iShares has 38.1% of the exchange-traded product market; Vanguard has 26.5%, and State Street’s SPDR ETFs has 16.5%,
    blackrock-is-biggest-beneficiary-of-fed-purchases-of-corporate-bond-etfs
  • Fascinating
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