BlackRock to Sell $114 Billion of Defunct Bank Securities

BlackRock, the world’s largest investment management firm, is set to sell $114 billion worth of defunct bank securities. The securities, which are tied to failed banks from the 2008 financial crisis, were once thought to be worthless, but have gained value in recent years as the economy has improved. BlackRock will sell the securities through a series of auctions over the next several months, giving investors the opportunity to bid on the distressed assets. The move is expected to help BlackRock and its clients recover losses from the financial crisis and potentially earn a profit on the sale of the securities.

BlackRock Collaborates with the US Government to Sell Off Multi-Billion Dollar Securities from Failed Banks

BlackRock, the largest asset manager in the world, is collaborating with the US government to sell off $114 billion worth of securities. 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, three weeks after placing both Signature and SVB into receivership following a run on deposits in March.

The securities primarily include Agency Mortgage Backed Securities, Collateralized Mortgage Obligations, and Commercial Mortgage Backed Securities. The FDIC has tapped BlackRock to orchestrate the sale, which is intended to be gradual and orderly to avoid disturbing the market.

This isn’t the first time federal regulators have hired BlackRock for support. Following the 2008 financial crisis, BlackRock managed $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 CEO Larry Fink has suggested that blockchain tokenization could help drive a more efficient payments system, so long as they’re regulated properly. BlackRock holds $10 trillion in assets under management, outpacing all rivals including Vanguard Group and Fidelity Investments. 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.

Despite the government’s reluctance to refer to it as 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. 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 Credit Suisse.

In conclusion, BlackRock’s collaboration with the US government to sell off multi-billion dollar securities from failed banks is a well-planned decision that will prevent market disruption. The involvement of asset managers such as BlackRock is not new to federal regulators, especially during crises such as the 2008 financial crisis and the covid pandemic in 2020. BlackRock’s interest in blockchain tokenization reveals the potential of the technology to drive a more efficient payment system if regulated correctly.

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