Since the Covid bailouts of 2020, everyone and their mother has been paranoid about the evil financial behemoth that is BlackRock. Sure, the firm controls $8 trillion in assets, and since the passing of the CARES act has access to the Fed window.
Such privilege enabled them access to cheap loans in order to buy up real estate and outbid the average middle class American trying to raise and support their families in their own home in hopes of fulfilling the American dream.
Fortunately, much of this BlackRock fear-mongering is just that. As the Fed continues to increase the cost of capital, that affects everyone, even those with access to the Fed itself. Suffice to say, BlackRock’s influence is dwindling with every rate hike Fed Chair Jerome Powell passes. Once the Fed is done waging its financial war, an insolvent BlackRock may be found in the carnage. Not only that, but people at the grass roots level are taking a stand against BlackRock on multiple accounts. The firm is eating itself and may not be able to take a path towards redemption.
Pain Across the Pond
BlackRock’s influence in capital markets is an extension of power by the Davos crowd. In short, Davos’s plans run through BlackRock. BlackRock is a front for Davosian money laundering, and their well is drying up fast (more on that later). With their influence, BlackRock can black mail governments as we saw with the BoE being forced to buy gilts and pension funds were forced to sell them due to the mismanagement of BlackRock’s LDIs. This passage from a Zero Hedge article sums up exactly what happened:
“…the ugly situation in the UK was because pension funds had used LDI to leverage their gilt portfolios through interest rate swaps and repurchase agreements up to seven times – 7X! – to match their actuarial liabilities.
Leverage works remarkably well when interest rates are stable. Leverage works even better when interest rates are falling. But when interest rates rise in short order, leverage is devastating.
The fact is, in the U.S., like in the UK and many other developed nations, public pension funds are grossly underfunded. Consequently, more and more pension funds are borrowing money to play the markets. The goal is to boost returns to cover their massive funding gaps.”
A decade of cheap money created a class of investments (LDIs) which created yield out of using leverage against sovereign debt and other assets blown up in value thanks to that cheap money. Now money isn't cheap and that cycle is reversing. There’s a saying “what leverage giveth on the way up, taketh away twice as fast on the way down.”
That's what happened to the UK pension funds.
Naturally, BlackRock wasn’t going to bail out the markets/pensions. This forced the BoE to pivot. They then attempted the same strategy with Credit Suisse in hopes of financial contagion and panic spreading into the US that would’ve caused a Black Monday event. However, their bluff was called as over $3Billion dollars in Fed swap lines was sent to Switzerland to support Credit Suisse, preventing a Black Monday. There will not be a Black Monday under BlackRock’s thumb because as long as they’re going up against the Federal Reserve, it’s hopeless. Their influence is dwindling…
The reason why BlackRock can’t black mail the Fed like they can anyone else is because the Fed has their finger on BlackRock’s cash flow. The Fed will eventually liquidate them as they raise rates and bankrupt them like they are Europe.
Undermining the Fed Window
The Fed is raising rates to protect itself and it’s credibility. Since the passing of The CARES Act, now both corporates and non-financial corporates have access to the Fed window. Before, it was only accessible to the primary dealers (banks). BlackRock was not a primary dealer before 2020 and still isn’t. However, Congress (not the Fed) giving BlackRock access to the discount window enabled them to fund their operations of supporting the stock market, buy up real estate, and cut out the middle class. During this time, interest rates were near 0%, giving BlackRock basically free money to fund such operations and manipulate American markets.
Since COVID-19, IOER was zero, and the repo window was only available to the Fed’s primary dealers. Now, they’re being cut out of the monetary transmission system (aka the money making machine) by the likes of BlackRock. By raising rates, Powell is putting a stop to this by taking back the Fed’s monetary independence out of the grasp of global corporatist communists within and outside of Congress.
The Chink In the Armor
BlackRock will not be able to black mail the Fed like they did the BoE. As the Fed raises rates, BlackRock won’t be able to continue their operations with a higher cost of capital.
They can lose everything. BlackRock has just over ~ $30B of cash. For some perspective, Continental Illinois had -$42 billion in cash before they went bankrupt in 1982. Suffice to say, BlackRock has significantly less cash than they do assets under management (AUM). Their AUM is shrinking because they’re being forced to liquidate as the cost for capital increases as the Fed ferociously raises rates. They’re leveraged to the teeth and will have to continually add collateral. Ultimately, their funds can be transferred to someone else, but the company itself can go bankrupt just as Lehman or any other fund went down.
Divestment As the Ultimate Form of Blackmail
Similar to bank runs, multiple states in America are pulling a run on BlackRock. Multiple states are pulling their funds from BlackRock due to the lack of confidence they have in BR’s ability to manage their pensions. The passage from the following article reveals how one state of many are taking action and a stand against BlackRock.
"…Missouri State Treasurer Scott Fitzpatrick today announced that the Missouri State Employees’ Retirement System (MOSERS) has sold all public equities managed by BlackRock, Inc., pulling approximately $500 million in pension funds from the investment manager. BlackRock has a record of prioritizing ESG initiatives, which include restrictive climate policies, over shareholder returns. MOSERS sold off all of its equity holdings with BlackRock after the asset management company refused to abstain from proxy voting, which allows shareholders in companies to have a say in decisions on issues and vote in elections for board members, as BlackRock advanced political causes that sacrificed return on investment for their customers."
By raising rates, the Fed will attack BlackRock’s balance sheet to control their income stream. Just as Fink wanted to go after Powell’s lunch with access to the Fed window, Powell is going after Fink’s lunch by denying him that access by draining trillions of dollars out of the economy and raising rates both in reverse repo and FFR.
The Real Mandate
At the end of the day, it’s all about incentives. The Federal Reserve is using its tool belt of monetary policy to gain back its financial independence from the rest of the world. Powell et.al have decided that it’s time for the Fed to be America’s bank, and not the lender/buyer of last resort for any country that needs a bailout.
The Fed’s allegiance is to the banks, and only the banks, not some corporate Leviathan operating on shadow banking whose goal is to manipulate and crash markets and governments and buy them for pennies on a dying dollar. This is not the will of the Fed, especially the Fed Chair.
Powell’s mission is to preserve the credibility of the Fed. Although many think the goal is preserving the Fed’s dual mandate of steady prices and full employment (AKA getting inflation under control), the actual goal is to destroy the offshore dollar market. It’s only because of the offshore dollar market Davos and it’s outfits like BlackRock have become so successful.
The death of the offshore dollar market is accomplished as quantitative tightening occurs in the background as the Fed aggressively raises rates to bankrupt the global communists running Europe and dictating US monetary policy. Regaining monetary independence is the job being done. As Powell continues to say, the Fed will not stop until this job is done.
~ Phil Gibson