Ten trillion dollar man: How BlackRock's Larry Fink became the new conscience of Wall Street
Abraham George Market Musings
Larry Fink is probably the most important and powerful financier in the world now. He is the Chairman, CEO, and co-founder of the biggest asset management firm BlackRock. On Wall Street, he has earned the nickname ‘Mr. Fix it’. Black Rock manages about $ 10 trillion but I have read even bigger numbers. At $10 trillion, it is equivalent to the combined annual economic output of Germany, Japan, and Britain. So it is colossal.
During the 2008 GFC, the US Treasury tapped Fink to finance the $30 bio sale of Bear Stearns to JP Morgan. BlackRock was designated to manage the toxic mortgage assets of Bear Stearns, AIG, Freddie Mac, Morgan Stanley, and a few other distressed financial firms.
In 2020 during the pandemic fallout, the Fed tapped BlackRock to help oversee the Fed’s efforts to stabilize the corporate bond market which was out of control. A BlackRock subsidiary was advising the Fed on the purchase of billions of dollars in commercial mortgage-backed securities and investment-grade corporate bonds. A first time for the Fed. Steve Mnuchin the Treasury Secretary then and Jerome Powell the Fed Chairman made a lot of calls to Fink in finding a solution to stabilize the markets.
Under Fink, BlackRock has risen to unbelievable heights in its 34-year history. It came into existence at the cusp of globalization, so it is important to listen to Fink and understand what BlackRock is up to now.
Fink is a very unassuming, soft-spoken person. He is pragmatic and probably has a better vision of the changing financial landscape than any other money manager or talking head in the financial world.
From Milton Friedman to Warren Buffett, profits have been the key driving force behind the business. But Fink thinks otherwise. He understands the millennial generation thinking better than anyone.
It is worth reading his yearly letter to BlackRock clients and other CEOs. He is the “new conscience of Wall Street”. He talks like a politician, statesman, environmentalist, and investment banker. All wrapped into one.
Gorden Gekko, the character from the cult-classic movie Wall Street may not agree with him. Fink says greed was good but the purpose is better. But many on Wall Street don’t like what he is saying. Sam Zell, the real estate billionaire said, “I didn’t know Larry Fink had been made God.” Even Warren Buffett is not that pleased with Fink and Buffett said, “I don’t believe in imposing my political opinions on the activities of our businesses.”
While he sermonizes his views a lot, I think one should listen to him. In many ways, he is a different breed of Wall Streeter. He is from California, a Democrat, and a past failure. Before starting BlackRock, he was fired from Credit Suisse First Boston for a 100 million dollar lousy bet that he made in 1986. He was pressured to leave First Boston for failing to manage risk but that changed his life for the better.
After a year and a half of deliberations, he ventured into creating BlackRock with a greater emphasis on risk management. He got help from Steve Schwarzmann of Blackstone. A 5 million-dollar investment from Schwarzmann was the beginning but Fink was able to raise trillions of dollars with his innovative ideas and financial engineering. It was a pity that Schwarzmann could not work out a deal with Fink and be part of the biggest asset management company in the world. But Schwarzmann in his own right is a very big asset manager as the chief of Blackstone.
Fink continuously leveraged his edge to help consult and restructure much bigger companies’ toxic assets. He put himself ahead of the game long before anyone else did.
Fink sees opportunities in a crisis. His views on climate change and digital currencies should not be ignored. He strongly believes that the current crisis along with rising inflation will lead to the development of a global digital payment network. He claimed that the Russian-Ukraine conflicts and the Chinese standoff will put an end to the forces of globalization that have been at work for more than 30 years. It is very important that one pays attention to what he says now as his company BlackRock was born at the start of globalization and now we are going in reverse.
Larry Fink said, “A well-designed global digital payment system can improve international transaction settlement while lowering the danger of money laundering and corruption”.
Now you know why I have been advocating Ripple (XRP) and Stellar (XLM) could potentially be game-changing.
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Abraham George is a seasoned investment manager with more than 40 years of experience in trading & investment and multi-billion dollar portfolio management spanning diverse environments like banks (HSBC, ADCB), sovereign wealth fund (ADIA), a royal family office and a hedge fund.