News today has the US firm BlackRock buying the asset management arm of the UK’s Barclay’s bank which will make BlackRock the world’s largest asset management firm with some $2.7 trillion in assets under its wing. A finance page headline, but could there be more to this?

BlackRock’s top man, Larry Fink, made his mark as an early player in the securitized debt market in, I believe, Boston. He was pushed out of his firm. He then wound up at BlackRock where he turned to, you guessed it, giving valuations to securitized debt bonds. In a tv interview Fink said his firm was using the declining property markets, not the foreclosure rates, to smartly devalue securitized mortgages. As I have stated ad infinitum, these erroneous valuations led to the credit meltdown of 2008.

Now Fink buys a key part of a bank severely damaged by the sharp devaluations of securitized debt. Coincidence or plan?

More interesting, BlackRock is a key adviser to the Obama Administration on valuation of “toxic” assets, the very things that Fink helped invent.

I find it fascinating that a man who first built a financial structure, turned to bringing it down and then to cashing in on the precarious situations of those institutions severely damaged by his work. Even more interesting, he is then hired by the US Government to advise it on securitized debt valuations.

Again, I am not a believer in conspiracies, but I find it hard to attribute Mr Fink’s amazingly successful journey to mere coincidence.

Leo Cecchini
June 2009