NEW YORK — Financial markets will not fully regain their footing until the housing market recovers, an outcome that relies on the success of the U.S. Treasury's rescue plan to stimulate lending, BlackRock Inc. Chief Executive Officer Laurence Fink said in an interview.
“There is no question we had this credit crisis for a year and a quarter now, and we had the worst two weeks in this entire credit crisis,” Mr. Fink said, voicing full support for Treasury Secretary Henry Paulson's $700 billion proposal for the government to take over illiquid assets and segregate them in a special fund.
“(Mr.) Paulson's measures are necessary measures. I don't think they are too much, and we don't know whether they are too little. But having the proposed fund to purchase non-conforming mortgages can help in terms of providing liquidity for those balance sheets with large pools of non-conforming mortgages,” Mr. Fink said.
Opaque credit investments, worth as much as $1 trillion, ignited the crisis amid uncertainty about the underlying mortgages that resulted in a worldwide crisis of confidence. So far, banks and firms around the world already have written down $500 billion worth of those assets.
Mr. Paulson and Federal Reserve Chairman Ben Bernanke both testified in Congress last week, in a bid to convince lawmakers of the need and urgency of approving the program, which will remove illiquid, hard-to-price assets from financial companies' balance sheets. The plan requires congressional approval.
“We had a collapse of confidence because of the Lehman (Brothers Holdings Inc.) bankruptcy, the potential failure at AIG (American International Group Inc., New York) and the failure of money-market funds,” Mr. Fink said. “You put those three things together and you have a real collapse of confidence affecting the entire capital markets.”
New York-based BlackRock, the largest publicly traded money management firm with $1.4 trillion in assets, is already handling $29 billion in assets from Bear Stearns Cos. Inc. that the Federal Reserve took over when the firm collapsed in March. BlackRock is 49% owned by Merrill Lynch & Co., New York, which Bank of America Corp., Charlotte, N.C., proposes to acquire.