Blackrock: Being on both ends of a scam
The Federal Reserve on Tuesday hired BlackRock Inc. to steer tens of billions of dollars in bond purchases. Again.
The details of the arrangement, including how much BlackRock will be paid for its services, have not yet been released. But it promises to be a lucrative venture for the firm, which could also be in a position to profit from the advice it gives.
Under one of the programs that BlackRock will help lead, the Fed can buy exchange-traded funds that hold stakes in investment-grade bonds, a type of investment that BlackRock sells.
BlackRock found itself in a similar situation during the last crisis. After Bear Stearns and American International Group collapsed, the New York Federal Reserve retained BlackRock to help oversee billions of dollars in ailing assets that had belonged to them. The firm helped price and sell those assets for the government at the same time it was helping private clients buy similar assets.
The Fed has not yet posted a copy of the contract it signed with BlackRock, though it plans to disclose more details. The central bank was slow to disclose the specific terms of its agreement with BlackRock during the last crisis, and even today the full details of what the firm earned have not been disclosed.
OK. That's bad, but the truth is actually worse.
Let's start with AIG.
For several months, BlackRock would have two teams working inside A.I.G.—one working for the company’s management, the other for the Fed.
AIG was just one of the first in a massive number of contracts.
The waterfall of government contracts attracted attention almost immediately. But when asked by members of Congress to explain what BlackRock was being paid and why it was selected without any competitive bidding, Fed officials, and Geithner in particular, revealed virtually nothing
What remained consistent was conflicts of interest.
As both the New York Times and the Wall Street Journal reported on Tuesday, BlackRock execs are now directing key elements of the government program at a time when they stand to reap great profits from the fallout of a problem they helped create...
Leading the pack of vulture capitalists profiting from the misery they inspired is the Private National Acceptance Co. (PennyMac), which BlackRock bankrolled. Stanford L. Kurland, chairman and CEO of PennyMac, is the former president of Countrywide Financial. A New York Times story in March, headlined “Ex-Leaders of Countrywide Profit From Bad Loans,” noted that Kurland’s new outfit was profiting from the misery it had helped cause: “After all, the banking behemoth (Countrywide) made risky loans to tens of thousands of Americans, helping set off a chain of events that has the economy staggering.”
...As the Times observed, “Countrywide has become synonymous with the excesses that led to the housing bubble.” Now Kurland’s new company specializes in buying back those forfeited and at-risk properties for pennies on the dollar and making money off new loans and sales.
So that was 2008-2009.
Surely they don't do these criminal deals anymore, right?
German investigators raided the offices of finance giant BlackRock on Tuesday, several media outlets reported.
The raid is part of the country's biggest post-war fraud investigation, known as the cum-ex scandal.
What is the cum-ex scandal? The scandal came to light in 2016 when it emerged that several German banks had exploited a legal loophole which allowed two parties simultaneously to claim ownership of the same shares. This contrived "dual ownership" allowed both parties to then claim tax rebates even though both were not entitled to it. The scandal cost taxpayers billions of euros.