Hes Uncle Sams favorite money manager. Laurence Fink, founder of BlackRock Inc., New York, which invests in mortgages and other forms of toxic debt at the heart of the banking crisis, gets a call pretty much whenever the federal government needs help cleaning up the latest financial mess.
Mr. Fink and his 5,300 employees are helping manage $30 billion worth of mortgage assets the feds guaranteed upon the collapse of Bear Stearns. They are overseeing the winding down of New York-based American International Group Inc. assets. Theirs is one of four investment firms managing a program in which the Federal Reserve buys $500 billion worth of mortgage-backed securities. And just last week, Mr. Fink said BlackRock wanted to participate in the Obama administrations private-public partnership program to buy up to $1 trillion in poisoned assets from ailing banks hardly a shocker, since the Treasury Department reportedly sought BlackRocks seal of approval before unveiling details of the plan.
Its a pretty specific set of knowledge that they have, said analyst Brad Hintz of Sanford C. Bernstein & Co. And it happens to be exactly what the government needs at the moment.
So how much money is BlackRock making from helping the government? The company is mum on the matter, citing client confidentiality agreements, and declined to make founder and CEO Mr. Fink or other officials available for comment. BlackRocks liaison to Washington, the Federal Reserve Bank of New York, wont say, either, although members of Congress have repeatedly requested the information since BlackRock was hired without competitively bidding for contracts.
But a look through BlackRocks regulatory reports and filings concerning a recent cleanup assignment in Florida offer a glimpse into this lucrative and rapidly growing bailout business.
Though little known among the general public, BlackRock manages $1.3 trillion in assets, mostly for pension funds and other big investors, and is widely considered, along with Bill Gross Pacific Investment Management Co., to be the worlds foremost bond expert.
Mr. Fink started BlackRock in 1988 after leaving First Boston, where he became the firms youngest managing director in 1981 at age 29. At First Boston, Mr. Fink invented collateralized mortgage obligations, or CMOs, which are bonds backed by mortgages and offer the prospect of fat yields to investors. But in 1986 he suffered a major setback, losing $100 million in three months when he bet wrong on bonds.
Mr. Fink has said that episode taught him to carefully monitor risk. Indeed, BlackRock pared back its exposure to risky mortgages in 2005, long before most people on Wall Street sensed anything was amiss. When Merrill Lynch was hammered with mortgage-related losses in 2007, it even tried to hire Mr. Fink as its CEO. (Merrill had acquired a 49% stake in BlackRock a year earlier for $8.5 billion in stock.)