BlackRock’s “Access and Influence” Business Model

A detailed examination of meeting calendars and phone logs from government agencies reveals the extraordinary access BlackRock has to top government officials.

From the earliest days of the financial crisis in the fall of 2007 to early 2018, BlackRock has visited or spoken by phone with senior government and banking officials in the U.S. on almost 400 different occasions according to meeting logs.

The logs detail:

  • More than 220 meetings and phone calls between BlackRock CEO Larry Fink and senior government officials.
  • 98 meetings between Obama White House officials and BlackRock executives
  • 185 meetings and phone calls between senior BlackRock executives and Treasury Secretaries spanning the Bush and Obama Administrations.
  • 37 meetings and phone calls between BlackRock and senior officials at the Federal Reserve.

The company’s top leadership, including Mr. Fink, have enjoyed open-door access to key U.S. officials over the years including: Treasury Secretaries Hank Paulson, Tim Geithner, and Jack Lew; Federal Reserve Presidents and Chairmen including Ben Bernanke, William Dudley, Jerome Powell, Tim Geithner and Janet Yellen; and senior Obama White House officials and advisors including Gene Sperling, Jeff Zients, John Podesta, and Rahm Emmanuel.

BlackRock lobbying staves off “systemically important” designation

Mr. Fink met with President Obama on six occasions during the President’s two terms, including a private meeting with the President on February 27, 2014.  The meeting came during a furious lobbying campaign by the company to stave off a government inquiry into whether asset management firms like BlackRock should be considered systemically important financial institutions.

Two days before Fink’s meeting with the President, the company sent a presentation to SEC regulators. Titled “Understanding Asset Management,” the presentation sought to educate regulators on how its business model was fundamentally different from other systemically important financial institutions.

BlackRock’s executives mounted the campaign in September 2013, after the Office of Financial Research (OFR), an independent Treasury Department office created by Dodd-Frank, released a report arguing that BlackRock and other asset managers posed a threat to the global financial system.

BlackRock personnel met with Gary Gensler, the Chairman of the Commodities Futures Trading Commission (CFTC) about “OFR’s study of asset management” on November 26, 2013 according to meeting logs. Later that afternoon, BlackRock met with SEC Chair Mary Jo White.

Between September 2013, when the report was released, and February 2014, when Mr. Fink met with President Obama, BlackRock officials met or spoke by phone with the White House, Treasury, SEC and CFTC officials on 18 different occasions.

In 2016, The Wall Street Journal reported that regulators had largely abandoned pursuing a closer examination of whether companies like BlackRock should be deemed “systemically important”, noting that BlackRock’s success “reflects the asset manager’s increased sway in Washington.”

Larry Fink’s role as government consigliere

As early as August 2007, Mr. Fink was called upon by Treasury Secretary Paulson to serve as a consigliere in dealing with the growing global financial crisis. The two spoke by phone or met at least 47 times as the crisis unfolded, often speaking several times per month between the fall of 2007 and the end of President Bush’s term in early 2009.

The meetings often included social occasions as well. During the height of the financial crisis in June 2008, Treasury Secretary Hank Paulson joined BlackRock directors at a cocktail party at the Emirates Palace Hotel in Abu Dhabi according to news accounts. The cocktail party appears to have been redacted from his official calendar.

Treasury Secretary Hank Paulson’s Official Calendar for June 1, 2008

 

New York Federal Reserve President Tim Geithner also regularly schmoozed with BlackRock executives.  In 2008, Geithner dined with BlackRock co-founder Ralph Schlosstein and his wife at New York’s swank Upper East Side restaurant Café Boulud.  He also joined Schlosstein for dinner at his home.  When he succeeded Paulson as Treasury Secretary, Geithner similarly stayed in regular contact with Fink , meeting and talking with him by phone on at least 88 different occasions.

While BlackRock’s role as a key advisor to financial policymakers is no secret, the relationship has benefitted the firm financially in significant ways. During the peak of the financial crisis in 2008 and 2009, BlackRock became a central processing unit for the disposition of toxic assets, winning several no-bid government contracts to control or monitor the balance sheets of Fannie Mae and Freddie Mac, the toxic assets of A.I.G. and the mortgage assets of Bear Stearns.

BlackRock meetings with government and central banks 2007-2017

 

While the frequency of BlackRock’s contacts with U.S. officials has ebbed somewhat in recent years, Fink and other BlackRock executives continue to connect with key officials. For instance, in December 2016 Mr. Fink was one of 16 business leaders named to President Trump’s Strategic and Policy Forum. Moreover, the Fed calendars for Janet Yellen and Jerome Powell list 5 phone calls and meetings with BlackRock officials in 2017.

BlackRock CEO Larry Fink served as Trump advisor on President’s short-lived Strategic and Policy Forum

 

BlackRock’s access to U.K. government officials pays dividends

The company has exercised its influence internationally as well, meeting at least 54 times with senior U.K. officials from 2009 to 2017, including Prime Ministers Theresa May and David Cameron, and Treasury officials George Osborne and Philipp Hammond, among others.

News reports have noted that Mr. Osborne met with BlackRock only days before being fired by Prime Minister May in July 2016. BlackRock then hired Mr. Osborne as an advisor seven months later in February 2017.

The U.K.’s Advisory Committee on Business Appointments, which originally gave a green light to Mr. Osborne’s BlackRock appointment, was later forced to revise its letter. While its ultimate decision did not change, it admitted that Mr. Osborne made decisions affecting the asset-management industry prior to his BlackRock appointment.

As in the U.S., BlackRock’s access to U.K. officials has been good for business: In 2009 the company was appointed by HM Treasury to provide banking advice. In 2013 the company was hired again by HM Treasury to advise the government on its RBS “bad bank” review.

In 2014, one month after Osborne removed pension restrictions requiring the purchase of annuities by pensioners, BlackRock’s president, Robert Kapito, told investors that the pension savings was now “money in motion” and that the company planned to “put a lot of effort into putting together more retirement products to capitalize on this market.”