A collection of 30 investor and sustainability focused groups have raised concerns in a letter to the Federal Reserve over potential conflicts of interest and lack of transparency and oversight in the recent agreement between the central bank and BlackRock.
On March 24, the Fed announced BlackRock as investment manager and adviser for three new programs aimed at supporting the U.S. economy amid the COVID-19 pandemic. Two of the three appointments relate to the Fed's new measures to ensure credit continues to be available to large employers: The primary market corporate credit facility, providing new bond and loan issuance; and the secondary market corporate credit facility, providing liquidity for outstanding corporate bonds.
BlackRock's financial markets advisory unit, which is separate from its traditional asset management business, was appointed as investment manager for both the PMCCF and the SMCCF.
In their March 27 letter, the groups, which include watchdog Public Citizen and Sierra Club, said the agreement could bring a concentration of financial power and a lack of limitations on public financial support for industry practices that harm the public good.
"By giving BlackRock full control of this debt buyout program, the Fed is further entwining the roles of government and private actors," the letter said. "In doing so, it makes BlackRock even more systemically important to the financial system. Yet BlackRock is not subject to the regulatory scrutiny of even smaller systemically important financial institutions."