How much do you know about the BlackRock
hedge fund? Better bone up fast, now that the folks at BlackRock are
calling the shots in the government's trillion-dollar bailout program.
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.
The U.S. picked BlackRock to manage the
assets once controlled by AIG and Bear Stearns and to analyze the
assets of Freddie Mac and Morgan Stanley. And as if that were not
enough on its plate, the Treasury Department has just selected
BlackRock to be one of the few firms trusted with using U.S. taxpayer
dollars to buy toxic assets from the banks and then resell them in a
process that presents enormous conflicts of interest with other
Bank of America, with a 47% ownership
position in BlackRock, is also the owner of what was once Countrywide
Financial, which led the pack in selling bad mortgages. The disposition
of those failed properties under BlackRock's tutelage will have much to
do with BofA's future profitability. As if that were not enough
financial incest, the former president and other top executives of
Countrywide now run a company created by BlackRock, which is profiting
mightily by snapping up the sort of distressed loans that they
originally had marketed.
Confused? You're supposed to be. That's
the point of a successful hedge fund, a totally unregulated activity in
which very rich people pool their money in order to more effectively
rip off the rest of us. And BlackRock is at the top of that game,
managing $1.3 trillion in assets. But in this round the stakes are far
higher because BlackRock, which did a great deal to cause the economic
meltdown, has now been put in charge of the government recovery effort.
But don't take my word for it; check out
the accounts of BlackRock's leading role in managing the bailout in The
New York Times and Wall Street Journal on Tuesday.
The New York Times: "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?"
The Wall Street Journal: "BlackRock helped
shape the government's toxic-asset plan, which critics have said helps
vulture investors buy assets on the cheap while exposing taxpayers to
the bulk of losses if the investments sour."
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
Countrywide, under Kurland's leadership,
specialized in those low "teaser" interest rates that caused people to
lose their homes when rates suddenly ballooned. 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.
"It is sort of like the arsonist who sets
fire to the house and then buys up the charred remains and sells it,"
Margot Saunders, a lawyer with the National Consumer Law Center, told
"Kurland is seeking to capitalize on a
situation that was a product of his own creation," noted Blair A.
Nicholas, a lawyer representing Arkansas teachers suing Kurland and his
fellow Countrywide executives. "It is tragic and ironic. ... But then
again, greed is a growth industry."
And once again the greediest will make out
like bandits, with only a few of them ever being held accountable.
Kurland sold $200 million in Countrywide stock shortly before the
meltdown and, in any case, the spectacular failure of his banking
experience only made him all that more employable.
Quoting federal banking officials, the
Times reported, "They said it was important to do business with
experienced mortgage operators like Mr. Kurland, who know how to
creatively renegotiate delinquent loans." Has our president never heard