Thursday, October 30, 2008

Larry Fink - Wall St Haven

For those who time an interesting read on Larry Fink, Ceo of Black Rock. I put him up there with Jamie Dimon. I heard him speak in Austin in the spring with Dick Fold and John Mack. He was the only who was worried. For sure he is in the middle of "crowd" and so his view is tainted but it is still clearer than most.

If Paulson and Federal Reserve chairman Ben Bernanke have been the public faces of the financial crisis, Fink has been its behind-the-scenes fixer and father confessor. The reason so many CEOs have kept him on speed dial in recent months is simple: No other firm is trusted to pick through the exotic securities infecting banks' balance sheets and place an accurate value on them.

At a time when the credit-rating agencies like Moody's and Standard & Poor's have lost face, BlackRock's valuations have become a kind of de facto Good Housekeeping seal of approval that buyers and sellers of distressed assets trust.

I don't consider this a black mark. What wise men do at the beginning fools do at the end.

But before anyone organizes a ticker-tape parade for Fink, keep in mind that 25 years ago he was an early and vigorous promoter of the CMO (collateralized mortgage obligation). Today the CMO and other asset-backed securities have become the monsters responsible for the credit crisis.


Currently BlackRock runs tens of millions of risk models a day. On each of those, computers continually run through an ever-changing number of potential risk scenarios, some 200 million of them per week - everything from what happens if the U.S. starts defaulting on its debt to what happens if China stops buying it. This type of analytical power is what has drawn the world's most desperate companies to BlackRock.

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