BlackRock, the world’s largest asset manager, is collaborating with the US government to sell off $114 billion worth of securities tied up with American banks that failed last month. The sale includes $27 billion worth of securities from Signature Bank and $87 billion from Silicon Valley Bank (SVB).
The Federal Deposit Insurance Corporation (FDIC) announced the sale on Wednesday, more than 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 securities are primarily comprised of Agency Mortgage Backed Securities, Collateralized Mortgage Obligations, and Commercial Mortgage Backed Securities.
The FDIC has hired BlackRock to orchestrate the sale, which is intended to be “gradual and orderly” so as not to disturb the market, taking daily liquidity and trading conditions into account. This is not the first time that 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.
Despite the government’s reluctance to call it a “bailout,” all Silicon Valley Bank and Signature Bank depositors were fully covered after each was forced to shut its doors last month. The manner of the bailout was such that taxpayers would not bear the brunt of the expense, as was the case in 2008.
The 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.
BlackRock’s involvement in this sale highlights its pivotal role in managing global finance. With $10 trillion in assets under management, the company has outsized all rivals, including Vanguard Group and Fidelity Investments. BlackRock’s CEO Larry Fink has suggested that blockchain tokenization could help drive a more efficient payments system, provided they are regulated properly.