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Robert Scheer: Between BlackRock and a Hard Place
How much do you know about the BlackRock and the hedge funds it manages? 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 United States 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 BlackRock operations.
Bank of America, with a 47 percent 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 B of A’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 The 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 economy staggering.”
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 the Times.
“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 of recidivism?
— TruthDig.com editor in chief Robert Scheer‘s new book is The Pornography of Power: How Defense Hawks Hijacked 9/11 and Weakened America. Click here for more information. He can be reached at .(JavaScript must be enabled to view this email address).
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» on 05.22.09 @ 06:44 AM
SEND THOSE CORPORATE EXECs immediately to the Hillsdale College’s Summer Elder Hostel [at Hillsdale, MI] so they can bone-up on neo-‘Gilded Era’ revisionist economic history. It’s a better wake-up call than they’ll learn from readings of either New York City newspaper quoted.
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» on 05.22.09 @ 08:38 AM
Another Dog Bites Man story. So the super-rich and the super-greedy choose not to
play by the rules that govern the rest of us? What a surprise.
These big-money fat-cats bundle huge amounts of campaign contributions for BOTH parties, and exact their sweetheart, behind the scenes deals no matter whether it’s Bush and Cheney, or Rahm Emmanual and Biden.
Why does Scheer think that everyone in Washington always talks “Reform!”, but things continue to get worse?
It’s what they call “Government’s Golden Rule” - Them with the Gold set the rules.
The only good thing that could be said about this is that they probably could help us balance the State budget if BlackRock were out here. Certainly the rascals in
Congress and the Treasury are no worse (often better) than the incompetent
scoundrels in the Legislature.
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» on 05.22.09 @ 04:45 PM
The hypocrisy lies in the fact that all of you who castigate the “rich” and the “wealthy” are normally just losers who can’t figure out how to do it for themselves. It is simple envy. Having won the lottery, it is likely you would not give your wealth to the poor, the government, or throw it down a well. The rich must be rich because they somehow cheated you to obtain their wealth, right? They are greedy because they don’t share it with YOU right? Right. So shut up and get a job.
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» on 05.23.09 @ 12:47 AM
“Get your own” [post below] sounds like an off-spring of the “Greatest [sic.] Generation” whose motto remains “I’ve Got MINE, SO SC**W” EVERYONE ELSE”! THEY SURFACED MOST NOTICEABLY DURING THE REAGAN ERA AND CONTINUES WITH THE 40-SOMETHINGS TODAY: AVARICE, HEDONISM, ALL THE WORST QUALITIES. MANY - NOT ALL, THANKFULLY - ARE MONSTERS AMONG US; FLASHING THEIR EXPENSIVE CLOTHES LIKE PEACOCKS STRUTTING DOWN THE BOULEVARDS OF LIFE - ALWAYS CAREFUL TO AVOID HANDING COIN TO BEGGARS OR NEEDY. THANKFULLY NOT ALL THAT GENERATION OF PLASTIC IDIOTS INFLUENCE POLICY; THEY MERELY YELP LIKE PUPPOES WHEN THEY DON’T GET THEIR OWN WAY. NONE OF THEM HAVE “PAID DUES”, SERVED IN UNIFORM DURING WARTIME, NOR HAS A CLUE ABOUT SELF-SACRIFICE, PATIENCE, OTHER GOLDEN VIRTUES. THEY WANT ONLY THEIR SELF-ABSORBING INSTANT GRATIFICATION - ARISTOTLE WROTE ABOUT THEM IN TIMES PAST.
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