BlackRock – the world’s largest asset manager – is collaborating with the U.S. government to sell off eleven figures worth of securities tied up with American banks that failed last month.
The sale $114 billion sale will include $27 billion worth of securities from Signature Bank, and $87 billion from Silicon Valley Bank (SVB).
Securities Dump Incoming?
The Federal Deposit Insurance Corporation (FDIC) announced the sale on Wednesday, over three weeks after placing both Signature and SVB into receivership following a run on deposits in March.
“The securities are primarily comprised of Agency Mortgage Backed Securities, Collateralized Mortgage Obligations, and Commercial Mortgage Backed Securities,” explained the agency.
The FDIC tapped BlackRock to orchestrate the sale, which is intended to be “gradual and orderly” so as not to disturb the market, by taking daily liquidity and trading conditions into account.
This isn’t the first time federal regulators have hired BlackRock for support. Following the 2008 financial crisis, the Federal Reserve and FDIC tapped the firm to manage $130 billion in bad debt once belonging to Bear Stearns and American International Group. The central bank also turned to Blackrock to help stabilize the economy at the start of the covid pandemic in 2020, by overseeing certain debt-buying programs.
BlackRock holds $10 trillion in assets under management, outsizing all rivals including Vanguard Group ($7.2 trillion) and Fidelity Investments ($4.5 trillion). Both Blackrock and Fidelity have involved themselves with Bitcoin in some capacity, with the former partnering with Coinbase to launch a Bitcoin trust fund, and the latter allowing investors to add Bitcoin to their retirement 401(k) plans.
BlackRock CEO Larry Fink has suggested that blockchain tokenization could help drive a more efficient payments system, so long as they’re regulated properly.
Bailing Out the Banks
Despite the government’s reluctance to call it a “bailout,” all depositors to both Silicon Valley Bank and Signature Bank were fully covered after each was forced to shut its doors last month. The manner of the bailout was such that taxpayers wouldn’t bear the brunt of the expense like in 2008.
Panic around SVB began after the company confirmed a realized loss of $2 billion after selling off its bond portfolio, prompting investors to worry about whether the firm was solvent. That worry quickly spread to other banks, eventually impacting European banks and claiming the financial giant Credit Suisse.
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