Meet BlackRock, the New Great Vampire Squid

BlackRock is a global financial giant with customers in 100 countries and its tentacles in major asset classes all over the world; and it now manages the spigots to trillions of bailout dollars from the Federal Reserve. The fate of a large portion of the country’s corporations has been put in the hands of a megalithic private entity with the private capitalist mandate to make as much money as possible for its owners and investors; and that is what it has proceeded to do.

To most people, if they are familiar with it at all, BlackRock is an asset manager that helps pension funds and retirees manage their savings through “passive” investments that track the stock market. But working behind the scenes, it is much more than that. BlackRock has been called “the most powerful institution in the financial system,” “the most powerful company in the world” and the “secret power.” It is the world’s largest asset manager and “shadow bank,” larger than the world’s largest bank (which is in China), with over $7 trillion in assets under direct management  and another $20 trillion managed through its Aladdin risk-monitoring software. BlackRock has also been called “the fourth branch of government” and “almost a shadow government”, but no part of it actually belongs to the government. Despite its size and global power, BlackRock is not even regulated as a “Systemically Important Financial Institution” under the Dodd-Frank Act, thanks to pressure from its CEO Larry Fink, who has long had “cozy” relationships with government officials.

BlackRock’s strategic importance and political weight were evident when four BlackRock executives, led by former Swiss National Bank head Philipp Hildebrand, presented a proposal at the annual meeting of central bankers in Jackson Hole, Wyoming, in August 2019 for an economic reset that was actually put into effect in March 2020. Acknowledging that central bankers were running out of ammunition for controlling the money supply and the economy, the BlackRock group argued that it was time for the central bank to abandon its long-vaunted independence and join monetary policy (the usual province of the central bank) with fiscal policy (the usual province of the legislature). They proposed that the central bank maintain a “Standing Emergency Fiscal Facility” that would be activated when interest rate manipulation was no longer working to avoid deflation. The Facility would be deployed by an “independent expert” appointed by the central bank.

The COVID-19 crisis presented the perfect opportunity to execute this proposal in the US, with BlackRock itself appointed to administer it. In March 2020, it was awarded a no-bid contract under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) to deploy a $454 billion slush fund established by the Treasury in partnership with the Federal Reserve. This fund in turn could be leveraged to provide over $4 trillion in Federal Reserve credit. While the public was distracted with protests, riots and lockdowns, BlackRock suddenly emerged from the shadows to become the “fourth branch of government,” managing the controls to the central bank’s print-on-demand fiat money. How did that happen and what are the implications?

Rising from the Shadows

BlackRock was founded in 1988 in partnership with the Blackstone Group, a multinational private equity management firm that would become notorious after the 2008-09 banking crisis for snatching up foreclosed homes at firesale prices and renting them at inflated prices. BlackRock first grew its balance sheet in the 1990s and 2000s by promoting the mortgage-backed securities (MBS) that brought down the economy in 2008. Knowing the MBS business from the inside, it was then put in charge of the Federal Reserve’s “Maiden Lane” facilities. Called “special purpose vehicles,” these were used to buy “toxic” assets (largely unmarketable MBS) from Bear Stearns and American Insurance Group (AIG), something the Fed was not legally allowed to do itself.

BlackRock really made its fortunes, however, in “exchange traded funds” (ETFs). It gained trillions in investable assets after it acquired the iShares series of ETFs in a takeover of Barclays Global Investors in 2009. By 2020, the wildly successful iShares series included over 800 funds and $1.9 trillion in assets under management.

Exchange traded funds are bought and sold like shares but operate as index-tracking funds, passively following specific indices such as the S&P 500, the benchmark index of America’s largest corporations and the index in which most people invest. Today the fast-growing ETF sector controls nearly half of all investments in US stocks, and it is highly concentrated. The sector is dominated by just three giant American asset managers – BlackRock, Vanguard and State Street, the “Big Three” – with BlackRock the clear global leader. By 2017, the Big Three together had become the largest shareholder in almost 90% of S&P 500 firms, including Apple, Microsoft, ExxonMobil, General Electric and Coca-Cola. BlackRock also owns major interests in nearly every mega-bank and in major media.

In March 2020, based on its expertise with the Maiden Lane facilities and its sophisticated Aladdin risk-monitoring software, BlackRock got the job of dispensing Federal Reserve funds through eleven “special purpose vehicles” authorized under the CARES Act. Like the Maiden Lane facilities, these vehicles were designed to allow the Fed, which is legally limited to purchasing safe federally-guaranteed assets, to finance the purchase of riskier assets in the market.

Blackrock Bails Itself Out

The national lockdown left states, cities and local businesses in desperate need of federal government aid. But according to David Dayen in The American Prospect, as of May 30 (the Fed’s last monthly report), the only purchases made under the Fed’s new BlackRock-administered SPVs were ETFs, mainly owned by BlackRock itself. Between May 14 and May 20, about $1.58 billion in ETFs were bought through the Secondary Market Corporate Credit Facility (SMCCF), of which $746 million or about 47% came from BlackRock ETFs. The Fed continued to buy more ETFs after May 20, and investors piled in behind, resulting in huge inflows into BlackRock’s corporate bond ETFs.

In fact, these ETFs needed a bailout; and BlackRock used its very favorable position with the government to get one. The complicated mechanisms and risks underlying ETFs are explained in an April 3 article by business law professor Ryan Clements, who begins his post:

Exchange-Traded Funds (ETFs) are at the heart of the COVID-19 financial crisis. Over forty percent of the trading volume during the mid-March selloff was in ETFs ….

The ETFs were trading well below the value of their underlying bonds, which were dropping like a rock. Some ETFs were failing altogether. The problem was something critics had long warned of: while ETFs are very liquid, trading on demand like stocks, the assets that make up their portfolios are not. When the market drops and investors flee, the ETFs can have trouble coming up with the funds to settle up without trading at a deep discount; and that is what was happening in March.

According to a May 3 article in The National, “The sector was ultimately saved by the US Federal Reserve’s pledge on March 23 to buy investment-grade credit and certain ETFs. This provided the liquidity needed to rescue bonds that had been floundering in a market with no buyers.”

Prof. Clements states that if the Fed had not stepped in, “a ‘doom loop’ could have materialized where continued selling pressure in the ETF market exacerbated a fire-sale in the underlying [bonds], and again vice-versa, in a procyclical pile-on with devastating consequences.” He observes:

There’s an unsettling form of market alchemy that takes place when illiquid, over-the-counter bonds are transformed into instantly liquid ETFs. ETF “liquidity transformation” is now being supported by the government, just like liquidity transformation in mortgage backed securities and shadow banking was supported in 2008.

Working for Whom?

BlackRock got a bailout with no debate in Congress, no “penalty” interest rate of the sort imposed on states and cities borrowing in the Fed’s Municipal Liquidity Facility, no complicated paperwork or waiting in line for scarce Small Business Administration loans, no strings attached. It just quietly bailed itself out.

It might be argued that this bailout was good and necessary, since the market was saved from a disastrous “doom loop,” and so were the pension funds and the savings of millions of investors. Although BlackRock has a controlling interest in all the major corporations in the S&P 500, it professes not to “own” the funds. It just acts as a kind of “custodian” for its investors — or so it claims. But BlackRock and the other Big 3 ETFs vote the corporations’ shares; so from the point of view of management, they are the owners. And as observed in a 2017 article from the University of Amsterdam titled “These Three Firms Own Corporate America,” they vote 90% of the time in favor of management. That means they tend to vote against shareholder initiatives, against labor, and against the public interest. BlackRock is not actually working for us, although we the American people have now become its largest client base.

In a 2018 review titled “Blackrock – The Company That Owns the World”, a multinational research group called Investigate Europe concluded that BlackRock “undermines competition through owning shares in competing companies, blurs boundaries between private capital and government affairs by working closely with regulators, and advocates for privatization of pension schemes in order to channel savings capital into its own funds.”

Daniela Gabor, Professor of Macroeconomics at the University of Western England in Bristol, concluded after following a number of regulatory debates in Brussels that it was no longer the banks that wielded the financial power; it was the asset managers. She said:

We are often told that a manager is there to invest our money for our old age. But it’s much more than that. In my opinion, BlackRock reflects the renunciation of the welfare state. Its rise in power goes hand-in-hand with ongoing structural changes; in finance, but also in the nature of the social contract that unites the citizen and the state.

That these structural changes are planned and deliberate is evident in BlackRock’s August 2019 white paper laying out an economic reset that has now been implemented with BlackRock at the helm.

Public policy is made today in ways that favor the stock market, which is considered the barometer of the economy, although it has little to do with the strength of the real, productive economy. Giant pension and other investment funds largely control the stock market, and the asset managers control the funds. That effectively puts BlackRock, the largest and most influential asset manager, in the driver’s seat in controlling the economy.

As Peter Ewart notes in a May 14 article on BlackRock titled “Foxes in the Henhouse,” today the economic system “is not classical capitalism but rather state monopoly capitalism, where giant enterprises are regularly backstopped with public funds and the boundaries between the state and the financial oligarchy are virtually non-existent.”

If the corporate oligarchs are too big and strategically important to be broken up under the antitrust laws, rather than bailing them out they should be nationalized and put directly into the service of the public. At the very least, BlackRock should be regulated as a too-big-to-fail Systemically Important Financial Institution. Better yet would be to regulate it as a public utility. No private, unelected entity should have the power over the economy that BlackRock has, without a legally enforceable fiduciary duty to wield it in the public interest.

_________________________

Ellen Brown is an attorney, chair of the Public Banking Institute, and author of thirteen books including Web of DebtThe Public Bank Solution, and Banking on the People: Democratizing Money in the Digital Age.  She also co-hosts a radio program on PRN.FM called “It’s Our Money.” Her 300+ blog articles are posted at EllenBrown.com.

 

38 Responses

  1. Your articles are very informative and inciteful. They are a confirmation of every suspicion I’ve ever harbored about “the market”. Can you give us your thoughts on bail-in, the little known component of Dodd-Frank with incredible negative consequences for average people. Your current article setting forth the influence of BlackRock, as well as the highlighted article, The Big Three, shows just how easily bail-in could be foisted on the American people as a last resort for saving and preserving the banking system. If bail-in should ever be invoked, it looks like it would be to save BlackRock, et al, rather than to help the American people. You have mentioned bail-in tangentially in a few earlier articles. Could you please comment further. Most of my friends acquaintances know nothing about bail-in but I see it as a looming catastrophe. Sincerely, Wayne F. Stiles Special Agent, FBI (retired) Senior WCC Investigator, Watergate Investigator

    Sent from Mail for Windows 10

    • Hi, bail-ins are what are supposed to happen under the Dodd-Frank Act before a bank is bailed out with taxpayer money. The funds of creditors, including depositors, would be taken first to capitalize the bank. But they were tried in Europe with disastrous results, so my guess is they will not be tried again — so overtly. Instead what has happened is a stealth bailout of the banks by the Fed under cover of a virus, as I wrote in my article of the same name on this blog about a month ago. Thanks for writing.

      • To lay off the loses overwhelmingly
        on petty portfolios and wage earner funds

        Ie no body dummy hands

        Will require a lot more segregation of investments by exposure
        This off sets the dynamics of mass
        One size fits all security types

        Now nimbly timely insider
        Position switching is the ordinary default modus operandi

  2. Science is wonderful,  valid and useful.  BUT, like climate science denial and the         cancer- tobacco link denial,  vaccines are based on corrupt and manipulated science: FAKE SCIENCE,  where whistle-blowers are dismissed and their studies burned.  >  NO MANDATORY TRACKING OR VACCINES!! SUPPORT MEDICAL FREEDOM. OUR bodies,  OUR choice. > ALSO: Reagan’s 1986 vaccine law MUST be repealed! It INDEMNIFIES vaccine makers from liability for deaths and injuries! A TAXPAYER fund he set up has paid out more than $4 billion so far for vaccine deaths and injuries,  with amounts LIMITED to $250,000 per death or injury. NOT CONFIDENCE INSPIRING! Sent from Yahoo Mail on Android

  3. Also, readers should be afraid of the following points I’ve been digging:

    1) Blackrock’s safekeeping of passive assets means Blackrock controls the VOTES for all those shares in corporate Americas annual board meetings.

    2) Blackrock is like a shadow-bank; it does “securities lending”. Think of what abuses are possible (you don’t have to look far, the ’08 GFC ING was abusing securities lending): Deciding which of its securities to “lend” freely, means it can theoretically build short-sale pressure on those securities. With the money from the lending,it can invest in other securities (building long-buy pressure). This is like a long-short hedge fund, wrapped in a humble passive investment manager.

    3) Unlike a bank, if blacrocks “depositors” lose money…there’s no reason to bail them out! (If you lose money on your ETF, are you gonna call the SEC? LOL, please!)

    4) Like a traditional investment bank, Blackrock engages in underwriting(!), advising, buying, managing the securities, trading, shadow banking/securities lending, and enters derivatives transactions for its own book. All without SIFI oversight. (No wonder Bank stocks are suffering in the stock market: the future of banking is Blackrock….all fun, no tears, blessed by the Fed no less).

    5) If Blackrock trades derivatives based on its insider knowledge of Fed 2019 bailout purchases in the securities markets, who will check? who will know?

    6) The Fed, agreement with Blackrock, relies on Blackrock itself to have a “Chinese Wall” (new meaning in the Trump era) on improper information in that part of Blackrock dealing with the Fed and the rest of Blackrock dealing with wall street and investors.

    6) To my knowledge, the Volcker rule does NOT apply to Blackrock.

    7) Despite its large size, Blackrock doesn’t bear “SIFI” (Systemically Important Financial Institution) status, which requires close oversight and accountability from….the Federal Reserve!

    8) Blackrock, as part of its humble “passive” buy-side holdings, undoubtedly owns the shares (and votes the proxies) of the Primary Dealers it is working with as part of the 2019 Fed bailout

    9) Blackrock runs the largest risk-management, margin requirement assessing, VaR assessment, securities software platform in the world, called “Aladdin”. Unlike a Bloomberg Terminal at every trader’s desk, Aladdin makes CALLS on when its customers should SELL a security if it becomes “too risky” in Aladdin’s judgement (nice name, Aladdin).

    10) Roughly $21 Trillion dollars of assets sit under Aladdin’s purview.

    11) Aladdin knows which derivatives have which counterparties! Nobody else, to my knowledge has that kind of vital strategic information.

    12) When Blackrock “buys” securities for the Fed, Blackrock will exercise its judgement as to what the “valuation” of those securities should be!

    There’s more, but I am not paid to look into BlaCKROCK. On the other hand, many of our pompous watchdogs in government ARE paid to enforce laws. But read the book: “chicken-sh*t club”, when you, dear reader, have time after ALL the distractions thrown your way, (for example: re-litigating the civil war, crowd sizes, etc etc). Enjoy your democracy.

  4. […] Meet BlackRock, the New Great Vampire Squid […]

  5. […] Ellen Brown Writer, Dandelion Salad The Web of Debt Blog, June 22, 2020 June 23, […]

  6. Laurence Fink, billionaire chairman of BlackRock, is also a director of the Council on Foreign Relations (CFR), flagship of the globalist “liberal world order” which has dominated US policy since WW2.

    Like most of his predecessors, Fed chairman Jerome Powell is a CFR member. Powell was a partner at the Carlyle Group, whose billionaire founder David Rubenstein is the current CFR chairman.

    Pete Peterson, co-founder of the Blackstone Group, was a former CFR chairman. His partner, billionaire Steve Schwarzman, is a CFR member.

    Since WW2, nearly every Fed chairman and most of the secretaries of State, Treasury, Defense and CIA have been CFR members.

    The major finance, energy, defense and media companies are CFR sponsors, and several of their execs are also CFR members. See lists at the CFR website.

  7. Good article for those who don’t know anything about Blackrock. Linking it today @https://nothingnewunderthesun2016.com/
    under the ECONOMIC NEWS section

  8. […] Meet BlackRock, the New Great Vampire Squid – “BlackRock is a global financial giant wit… […]

  9. 4 years ago I advocated changes in both monetary and fiscal policy. However, this was not to be carried out by outlaws, but the appropriate authorities.
    The major changes that is required globally is all those Revolutionary Constitutions, which is the basis of how all democracies operate. These must meet current needs of all free peoples on Earth.

  10. Hi Ellen:
    I noticed in your excellent article “Meet BlackRock, the new great vampire squid” that you referenced my article on BlackRock which was published on a news website up here in British Columbia. Thanks for doing so. I appreciate it.
    I’ve been reading your material for many years now and always find it very well written and and compelling in its analysis. Great work!
    All the best.
    Peter Ewart
    Prince George, BC

    • Thanks Peter, that was a great article! Insightful and well written. Sorry to be slow responding. I just don’t get time to look at blog comments much!

  11. Hmmm

    Robbing the common man to increase the wealth and power of the ruling elite, or some variation on that theme, such as the more contemporary “TAXATION WITHOUT REPRESENTATION!” has been the leading cause of revolution and greatly shortened life spans of said ruling elites for more than 7000 YEARS…..

    Clearly the inbreeding of the ruling elite has resulted in a gradual drop in their IQ given the ignorance and stupidity they have been continue to exhibit. So it is hardly surprising that despite the overwhelming advantages inherent in their elite educations and their wealth, power and influence, they remain living proof that sometimes heredity trumps environment……

  12. Centralization is hitched by self conflicting
    Counter PARTIES

    State control of the FIRE SECTOR
    With a peoples front government
    Is a necessary strategic objective

  13. Unz.com has introduced me to your work. Not an attorney, not an accountant, without an MBA, I nevertheless hold an advanced STEM degree, have a job that requires me often to read the text of statutes and regulations (though not to research case law), and prepare my own 1120-S annually. I can, with difficulty, for example, read the Internal Revenue Bulletin, and I have little trouble understanding most of what I read in The Wall Street Journal, so I have some limited basis to try to understand your article.

    But I am hung up on the “$454 billion slush fund established by the Treasury in partnership with the Federal Reserve.”

    When I skim the text of the Act itself, I see nothing there that would suggest such a fund. What have I missed, please?

    (If you reply, it would be preferable that you copied your reply to Unz.com, at your discretion. More readers would see the reply there, and I would see it sooner. I understand that there is a lot of nonsense in the comment column under your article at Unz.com, but still, some of us there are trying to bridge from what we understand to what you are teaching, so your answer there would be helpful and appreciated.)

    • Hi, I haven’t actually read the bill, which is 247 pages; but here is the Fed’s initial press release on the various new SPV facilities backed by the Treasury’s Exchange Stabilization Fund — https://www.federalreserve.gov/newsevents/pressreleases/monetary20200323b.htm
      And here is a Boston Review article referring to it as a slush fund —
      http://bostonreview.net/class-inequality-politics/andrew-elrod-mark-engler-meet-bailouts-new-slush-fund

      • Another cite: here is a release from the Congressional Research Service dated April 10, 2020 titled
        “Treasury’s Exchange Stabilization Fund and COVID-19” —
        https://crsreports.congress.gov/product/pdf/IF/IF11474
        It states:
        As part of the U.S. government’s economic response to the
        Coronavirus Disease 2019 (COVID-19), the Coronavirus
        Aid, Relief, and Economic Security Act (CARES Act; H.R.
        748/P.L. 116-136), was signed into law on March 27, 2020.
        It appropriates $500 billion to the U.S. Department of
        Treasury’s Exchange Stabilization Fund (ESF) to support
        loans, loan guarantees, and investments for businesses
        affected by COVID-19. In addition, the act temporarily
        permits the use of the ESF to guarantee money markets, as
        occurred in the 2008 financial crisis. ESF assets have
        already been pledged in 2020 to backstop several
        emergency lending facilities created by the Federal Reserve
        (Fed) in response to COVID-19.

        • The Congressional Research Service report you have last linked answers the main part of my question. It also affords a basis for further study. Cogently written by an informed person who does not obfuscate but wishes to be understood, the report is helpfully targeted at the tier of readers of The Wall Street Journal. Just what I wanted. Thank you.

          One often hears that congressmen fail to read bills before passing them. That may be so but, apparently, Congress at least has someone on staff who does read bills. (The first author of the linked report—that is, the person on staff who, as it would seem, read the bill—appears to hold a master’s degree in economics from a non-elite school. I had vaguely been expecting the first author to be an attorney and/or an Ivy League graduate, just because that’s how these things seem to work, but apparently not in this instance.)

          The whole report is interesting, including the references at its end, but here is what seems to be its most relevant paragraph: “These facilities were authorized under the Fed’s emergency lending authority (Section 13(3) of the Federal Reserve Act(12 U.S.C. 343)). Some of these facilities resurrect ones created in 2008 in response to the financial crisis, which extended the Fed’s role as lender of last resort from the banking system to the overall financial system for the first time since the Great Depression. Although the Fed did not rely on the ESF in 2008 and no 2008 facility experienced any losses, Treasury has pledged ESF assets to back several Fed facilities in 2020, in some cases before the CARES Act was enacted.”

  14. Thanks for this vital piece of inside research on the World’s biggest Monetary Manipulation Machine. Frightening unrestrained power.
    It proves we are in a Dictatorship not a Democracy. In this case the dictator escapes identification in the orchestrated media which must be in on the heist, adding to its mendacity.

  15. I think the plan was well thought out. Even throwing in covid 19 to finish their take over. I bet none of these people whom orchestrated this well planned take over attended public school. I think we need to call off the covid 19 BS and let our people go back to work, so family’s can salvage what they can. People die all the time from the flu. We shouldn’t count every deceased person as a flue victim. Our governments personal must have stock in this BlackRock Bank take over. So that’s what’s been going on. I been wondering why all the pretend BS. Just another cover-up for the Rich to get richer and cut down on population. Now we’ll all , well most of us will get to starve to death. I guess I’ll pray that it’s a swift death and I’ll pray for their good health for they must be the chosen ones. Wow true control. Who would of thought! Blessed Be.

  16. […] Jeffrey Epstein’s “suicide,” haven’t noticed the rancid stench surrounding Black Rock and the $7 trillion COVID swindle, are still oblivious to the whiff of bankster-driven biological […]

  17. […] Jeffrey Epstein’s “suicide,” haven’t noticed the rancid stench surrounding Black Rock and the $7 trillion COVID swindle, are still oblivious to the whiff of bankster-driven biological […]

  18. […] her latest article, PBI Chair Ellen Brown explores how BlackRock, the world’s largest asset manager and “shadow […]

  19. Stevlrid@gmail.com

  20. […] Meet BlackRock, the New Great Vampire Squid […]

  21. […] Chair Ellen Brown appeared recently on RT America’s In Question to discuss her latest article, which described how BlackRock emerged from the shadows to deploy billions of bailout dollars […]

  22. […] a prezzi stracciati di case pignorate durante la crisi poi rivendute a prezzi gonfiati, racconta Ellen Brown (giugno 2020), avvocato e attivista favore delle banche pubbliche, autrice di vari libri. Che nel […]

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