BlackRock's Dual Role in Economic Recovery Raises Conflict of Interest Concerns

Strategic Insights -

Sen. Charles Grassley's concerns about BlackRock's multifaceted involvement in the economic recovery process have sparked debate about potential conflicts of interest. The New York-based firm, 47% owned by Bank of America, has been hired as a government consultant on rescue efforts involving Bear Stearns, American International Group, and Citigroup, while simultaneously managing its own $1.3 trillion money management business. As BlackRock evaluates assets owned by the Federal Home Loan Mortgage Corp. and the Federal National Mortgage Association, concerns about policing potential conflicts of interest have grown.

Key Takeaways:

  • Sen. Charles Grassley has raised concerns about BlackRock's potential conflict of interest due to its dual role as a government consultant and a $1.3 trillion money management firm.
  • BlackRock has been hired to evaluate assets owned by the Federal Home Loan Mortgage Corp. and the Federal National Mortgage Association, which were seized by the government last fall.
  • The company has divided its consulting and management divisions into two separate buildings with separate computer networks to mitigate potential conflicts of interest.
  • Scott Amey, general counsel at the Project on Government Oversight, questioned the extent of BlackRock's control over the economic recovery process despite these separation measures.
  • James Wilkinson, former chief of staff to Treasury secretary Henry Paulson Jr., defended BlackRock's CEO Laurence Fink, calling him a "patriot" for helping the country in a time of need.
  • The company's 47% ownership by Bank of America may further complicate potential conflicts of interest.

Statistics:

  • BlackRock's money management business has assets under management of $1.3 trillion.
  • The Federal Home Loan Mortgage Corp. and the Federal National Mortgage Association, which were seized by the government last fall, have significant assets in need of evaluation.
  • BlackRock's consulting division is working under a government contract to help with the economic recovery.

Sources:

  • The New York Times
  • UPI
  • Project on Government Oversight