BlackRock to Sell $114 Billion in Securities from Failed US Banks

The world’s largest asset manager, BlackRock, is collaborating with the U.S. government to sell off eleven figures worth of securities tied up with American banks that failed last month. The sale, which is worth $114 billion, includes $27 billion worth of securities from Signature Bank and $87 billion from Silicon Valley Bank (SVB).

Securities Dump Incoming?

The Federal Deposit Insurance Corporation (FDIC) announced the sale on Wednesday, over three weeks after placing both Signature and SVB into receivership following a run on deposits in March. The securities involved in the sale are primarily comprised of Agency Mortgage Backed Securities, Collateralized Mortgage Obligations, and Commercial Mortgage Backed Securities, according to the agency.

BlackRock has been tasked with orchestrating the sale, which is intended to be “gradual and orderly” to avoid disturbing the market by taking daily liquidity and trading conditions into account. This isn’t the first time federal regulators have hired BlackRock for support. In the wake of the 2008 financial crisis, the Federal Reserve and FDIC enlisted the firm to manage $130 billion in bad debt that had previously belonged to Bear Stearns and American International Group. BlackRock also helped stabilize the economy at the start of the covid pandemic in 2020 by overseeing certain debt-buying programs.

BlackRock’s Size and Involvement with Bitcoin

BlackRock holds $10 trillion in assets under management, making it the largest asset manager in the world, outpacing its closest rivals, Vanguard Group ($7.2 trillion) and Fidelity Investments ($4.5 trillion). Both Blackrock and Fidelity have involved themselves with Bitcoin in some capacity, with Blackrock partnering with Coinbase to launch a Bitcoin trust fund, and Fidelity allowing investors to add Bitcoin to their retirement 401(k) plans.

BlackRock CEO Larry Fink has suggested that blockchain tokenization could help drive a more efficient payments system, so long as they’re regulated properly.

Bailing Out the Banks

Although the government is reluctant to call it 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. The manner of the bailout was such that taxpayers wouldn’t bear the brunt of the expense as they did during the 2008 financial crisis.

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.

Conclusion

The sale of securities tied up with failed American banks is a gradual and orderly process being handled by BlackRock on behalf of the U.S. government. The $114 billion sale includes $27 billion worth of securities from Signature Bank and $87 billion from Silicon Valley Bank (SVB), which were both placed into receivership after a run on deposits in March. While BlackRock is the largest asset manager in the world and has been enlisted for support during previous financial crises, it has also made efforts to involve itself with Bitcoin. Meanwhile, despite the government’s reluctance to call it a “bailout,” the depositors of both banks were fully covered after their doors were forced to close last month.

FAQs

Q1. What is BlackRock and what is its role in the sale of securities tied up with American banks?

A1. BlackRock is the world’s largest asset manager, and it has been tasked by the U.S. government with selling off $114 billion worth of securities tied up with American banks that failed in March 2022. This includes $27 billion worth of securities from Signature Bank and $87 billion from Silicon Valley Bank.

Q2. Why did the FDIC place Signature Bank and Silicon Valley Bank into receivership?

A2. Both Signature Bank and Silicon Valley Bank were placed into receivership by the FDIC after a run on deposits in March 2022.

Q3. What types of securities are included in the sale?

A3. The securities included in the sale are primarily comprised of Agency Mortgage Backed Securities, Collateralized Mortgage Obligations, and Commercial Mortgage Backed Securities.

Q4. What is BlackRock’s history with federal regulators?

A4. BlackRock has a history of working with federal regulators, including managing $130 billion in bad debt belonging to Bear Stearns and American International Group following the 2008 financial crisis, and helping stabilize the economy at the start of the covid pandemic in 2020 by overseeing certain debt-buying programs.

Q5. What is the size of BlackRock’s assets under management compared to its rivals?

A5. BlackRock holds $10 trillion in assets under management, which is larger than its rivals including Vanguard Group ($7.2 trillion) and Fidelity Investments ($4.5 trillion).

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