BlackRock

Today’s New York Times draws attention to BlackRock’s central role in government financial crisis decision-making even as it manages $1.3 trillion in private assets and executes contracts for the government and the Federal Reserve:

BlackRock has become so ubiquitous that some lawmakers, federal auditors and watchdog groups are now asking if the firm does too much, and if its roles as government adviser, giant federal contractor and private money manager will inevitably collide.

Can a company that is being paid to price and sell troubled assets for the government buy the same kinds of assets for private clients without showing preference? And should the government seek counsel from a company whose clients stand to make or lose billions if those policies are enacted?

“They have access to information when the Federal Reserve will try to sell securities, and what price they will accept. And they have intricate financial relations with people across the globe,” Senator Charles E. Grassley, Republican of Iowa, said. “The potential for a conflict of interest is great and it is just very difficult to police.”

The question answers itself. But I became even more troubled by this article after watching CNBC’s “Meeting of the Minds: The Future of Capitalism” this morning. BlackRock CEO Larry Fink did say some good things, but he also complained that U.S. tax policy discourages investment before calling for a ZERO PERCENT tax rate on long-term investments! Can you imagine taxing earned income with regular taxes plus FICA but not taxing the unearned income of billionaires?!?!

Such crazy talk prompted even free market televangelist Jack Welch — who spent the show defending unfettered free market capitalism against government intrusion at every opportunity — to call Fink nuts for imagining a 0% tax rate on investments. Yet Fink’s company is playing a central role in governmental decisionmaking over trillions of dollars in bailouts and asset sales. And, ordinary Americans losing our jobs and our homes, Fink has the ear of President Obama.

Posted by James on Tuesday, May 19, 2009