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Our Loss Is BlackRock’s Gain

Posted on May 19, 2009
BlackRock HQ
AP photo / Mark Lennihan

The mother ship: BlackRock’s headquarters in New York City.

By Robert Scheer

Editor’s note: Minor changes were made in the description of BlackRock in the first sentence and in the timing of the Treasury Department’s decision in the second paragraph.

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How much do you know about BlackRock and the hedge funds they manage? Better bone up fast, now that the folks at BlackRock are calling the shots in the government’s trillion-dollar bailout program. As both The New York Times and The Wall Street journal reported on Tuesday, BlackRock execs are now directing key elements of the government program at a time when they stand to reap great profits from the fallout of a problem they helped create. 

The U.S. picked BlackRock to manage the assets once controlled by AIG and Bear Stearns and to analyze the assets of Freddie Mac and Morgan Stanley. And as if that were not enough on its plate, the Treasury Department is widely expected to select BlackRock to be one of the few firms trusted with using U.S. taxpayer dollars to buy toxic assets from the banks and then resell them in a process that presents enormous conflicts of interest with other BlackRock operations.

Bank of America, with a 47% ownership position in BlackRock, is also the owner of what was once Countrywide Financial, which led the pack in selling bad mortgages. The disposition of those failed properties under BlackRock’s tutelage will have much to do with BofA’s future profitability. As if that were not enough financial incest, the former president and other top executives of Countrywide now run a company created by BlackRock, which is profiting mightily by snapping up the sort of distressed loans that they originally had marketed.

Confused? You’re supposed to be. That’s the point of a successful hedge fund, a totally unregulated activity in which very rich people pool their money in order to more effectively rip off the rest of us. And BlackRock is at the top of that game, managing $1.3 trillion in assets. But in this round the stakes are far higher because BlackRock, which did a great deal to cause the economic meltdown, has now been put in charge of the government recovery effort.


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But don’t take my word for it; check out the accounts of BlackRock’s leading role in managing the bailout in The New York Times and Wall Street Journal on Tuesday.

The New York Times: “Can a company that is being paid to price and sell troubled assets for the government buy the same kinds of assets for private clients without showing preference? And should the government seek counsel from a company whose clients stand to make or lose billions if those policies are enacted?”

The Wall Street Journal: “BlackRock helped shape the government’s toxic-asset plan, which critics have said helps vulture investors buy assets on the cheap while exposing taxpayers to the bulk of losses if the investments sour.”

Leading the pack of vulture capitalists profiting from the misery they inspired is the Private National Acceptance Co. (PennyMac), which BlackRock bankrolled. Stanford L. Kurland, chairman and CEO of PennyMac, is the former president of Countrywide Financial. A New York Times story in March headlined “Ex-Leaders of Countrywide Profit From Bad Loans” noted that Kurland’s new outfit was profiting from the misery it had helped cause: “After all, the banking behemoth (Countrywide) made risky loans to tens of thousands of Americans, helping set off a chain of events that has the economy staggering.”

Countrywide, under Kurland’s leadership, specialized in those low “teaser” interest rates that caused people to lose their homes when rates suddenly ballooned. As the Times observed, “Countrywide has become synonymous with the excesses that led to the housing bubble.” Now Kurland’s new company specializes in buying back those forfeited and at-risk properties for pennies on the dollar and making money off new loans and sales.

“It is sort of like the arsonist who sets fire to the house and then buys up the charred remains and sells it,” Margot Saunders, a lawyer with the National Consumer Law Center, told the Times.

“Kurland is seeking to capitalize on a situation that was a product of his own creation,” noted Blair A. Nicholas, a lawyer representing Arkansas teachers suing Kurland and his fellow Countrywide executives. “It is tragic and ironic. … But then again, greed is a growth industry.”

And once again the greediest will make out like bandits, with only a few of them ever being held accountable. Kurland sold $200 million in Countrywide stock shortly before the meltdown and, in any case, the spectacular failure of his banking experience only made him all that more employable.

Quoting federal banking officials, the Times reported, “They said it was important to do business with experienced mortgage operators like Mr. Kurland, who know how to creatively renegotiate delinquent loans.” Has our president never heard of recidivism?

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By joe, May 20, 2009 at 1:40 pm Link to this comment
(Unregistered commenter)

theres is only one think left to do REVELUTION.

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By curijay, May 20, 2009 at 12:10 pm Link to this comment

Does anyone know who else has setup a business similar to PennyMac.  They are the only name that is seen in the news.  Thanks for the help.

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By KDelphi, May 20, 2009 at 11:33 am Link to this comment

JEEEZZUUS!! How long are we gonna do this??!!

jerry gates, you had me, until the last couple paragraphs…

coloradokarl—My neighbors and I do not have the money to do that…

dihey—“If Truthdig could reprint comments made during the onset of “bailout” you would find that I stated: “this will become the greatest illegal money-grabbing scandal ever in US history”.

Yes, and, those that did say that were castigated as “not caring about peoples’ retirements and stuff”. Well, where are your retirement accounts, now, folks? Ask T-bill Timmy, as beer dr says.

Louise,.Obama was a senator them, and lobbied heavily for the Bailout Bill. All the Dems did. We should blame them all. If they had admitted amendments by Kucinich, Sanders, Kaptur, Sherman and others, the basterds wouldve at least had to clean up SOME of their mess…

From Dandelion Salad on BlackRock: (March 9)

“Friends of Angelo” (FOAs):

“A June 2008 Conde Nast Portfolio expose’ revealed a number of influential lawmakers and politicians who became beneficiaries of “favorable mortgage financing” from Countrywide. The list of FOAs includes Senate Banking Committee Chairman Christopher Dodd, Senate Finance Committee Chairman Kent Conrad, and former Fannie Mae CEOs Franklin Raines and Jim Johnson.

“According to the report, Senator Dodd’s arm was twisted to the tune of a $75,000 reduction in mortgage payments from Countrywide on his two homes . . . at rates reportedly well below market!”

Giethner’s ties that bind:

According to Henry Kissinger, Geithner was hired to help research a book. During the 1980s, the Kissinger Associates was an extremely small firm with only 25 employees, including Geithner and Henry Kissinger’s bodyguards. AIG’s relationship with the Kissinger Associates dates back to the time period when Geithner was an employee. In 1987, AIG appointed Henry Kissinger Chairman of their International Advisory Board. In 2000, AIG and Kissinger Associates launched a joint venture to provide financial advisory services to corporations. The third partner in the venture was the Blackstone Group, which has grown into one of the largest alternative asset management firms in the world.

Pete Peterson, the co-founder of the Blackstone Group, was responsible for recruiting Geithner for the position of President of the New York Federal Reserve, which he filled from 2003 until his appointment as Treasury Secretary. An offshoot of the Blackstone Group, BlackRock Inc., received numerous no-bid contracts from the New York Federal Reserve in the buy-out of Bear Stearns, and the bailout of AIG devised by Geithner. In 1988, Laurence Fink launched BlackRock Inc. as a money management division of Blackstone. In 1993, BlackRock Inc. separated from the Blackstone Group to operate as an autonomous firm, and currently manages $1.28 trillion in assets.”

Apr. 30, 2009

Read more: “Timothy Geithner and BlackRock Inc. A Former Employer’s Business Associate Wins No-Bid Contracts |” -

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By thebeerdoctor, May 20, 2009 at 10:53 am Link to this comment

Since the WSJ online link no longer works, it should be noted that BlackRock Chairman and CEO, Laurence Fink, is up to his eyeballs in all of this financial swamp. Now they are getting paid by the government to supposedly clean up the mess that they were certainly involved with helping to create.  BlackRock in 2007, set up $5.5 billion in CDO deals, most of which defaulted, causing investor loss of over 50%. One such financial product was the Pinnacle Point II Funding Ltd., which was set up in June of that year and crashed in December. Now BlackRock manages $100 billion of AIG real estate trash, and gets to dispense the toxicity by using the tax payer’s cash.

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By Eric L. Prentis, May 20, 2009 at 10:24 am Link to this comment

A major culprit in the 2008-09 credit crisis is control fraud, bank CEOs gamed the system with bad loans for their own bonus-induced benefits. Plus, bankers knew the Fed, their own privately controlled institution, would bail them out, also, bankers have US politicians at their beck and call. In addition, bankers’ money bought off most academic financial economists which is why we are working under theories that support the banks’ looting, e.g., assuming self-equilibrating markets, no government regulation of new financial products is optimal, the formation of too-big-to fail financial institutions frees the markets to perform effectively, securitization reduces risk in the financial system, the stock market operates like a large casino and the efficient market hypothesis, which underpins most financial-economic statistical models, are theories that are either incorrect or severely flawed and is why risk management’s value-at-risk models did not predict this devastating economic crisis. From a realist’s standpoint, when fighting the power of the banks, just try getting a research paper critical of any of the above theories published in a leading peer-reviewed academic journal, the self-described reviewing experts either simply reject the effort out of hand because it doesn’t comply with the existing approved theory or say they don’t understand it. Corporate and government looting, political bribes and accounting payoffs are both disgusting and economically counterproductive. US society is rotting from the top down, greedy bankers, slimy politicians and on-the-take academics should be ostracized from polite society. Dare I say, we need a new order?

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By thebeerdoctor, May 20, 2009 at 10:24 am Link to this comment

re: iftankcouldtalk

Do you have a personal vested interest in BlackRock? Your altruistic description is also a deception:

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By iftankcouldtalk, May 20, 2009 at 10:05 am Link to this comment

As an avid follower of the money management industry I am disappointed by the pure lack of journalism that went into this story.

Were any facts checked at all?  Don’t present yourselves as carriers of the “truth” and post stories filled with errors.

Here’s one:  BlackRock isn’t an “unregulated hedge fund”.  Quite the opposite.  They’re a regulated investment advisor that runs money for firmen, teachers, endowements, and regular investors just like you and me.

You “report” that BlackRock has been selected as a fund manager for PPIP.  The Treasury announced the final fund managers already?  Really?  As avid news followers that present “truth” you should know that Treasury has not announced any firms yet.  Early to mid June.  Another error.

BlackRock has done more than any other firm to stabilze markets for the benefit of the american taxpayer.

Please stop and do some reporting before posting such misinformed trash.

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By Thomas Mc, May 20, 2009 at 9:11 am Link to this comment

The USA is being screwed over by the same corporations that have been robbing this country blind for decades, the only difference now is that it is in the news. At least now the citizenry is waking up to the fact that our “government” is little more than a tool for them to do it to us.

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By mike112769, May 20, 2009 at 8:11 am Link to this comment

LOLOL! The only thing that’s hard to believe here is that people are upset. There is no diference between this and any other administration, regardless of campaign promises. The American public keeps on getting kicked in the teeth time and time again. Every 2 to 4 years there’s a big “scandal” that “rocks the nation”. So we blindly vote in someone who will finally “change” politics. We, as a society, are so stupid it makes me ill. We keep playing the game by their rules, and we keep getting our faces rubbed in the dirt. This country hasn’t seen any significant political change since the civil rights movement. The ONLY THING politicians care about is pleasing their campaign donors. The donors run this country through them. Anyone who expects any “change” in America is a purebred, blind, stupid idiot. The American public will NEVER be allowed to win, as long as the public follows “their” rules. Why should government reform banking laws? The politicians are getting too much money the way things are. They don’t give a tinker’s damn about ANY of us. If the government wants to impress me, it can start by getting rid of that private bank that owns and prints America’s money, AKA the Federal Reserve.

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By Louise, May 20, 2009 at 8:11 am Link to this comment

A little slow on the uptake here. BlackRock has been steering the ship since before Obama won the election!

The U.S. Treasury (Paulson) selected BlackRock as asset managers to help implement the $700 billion troubled asset relief program, (TARP) signed into law by President George W. Bush, on October 3, 2008. Named shortly after, (in October, 2008) BlackRock has been setting the agenda ever since!

Larry Fink, CEO of BlackRock, assists the government with bailouts. He and other executives weekly bend the ear of Washington officials, to LOBBY in favor of specific rescue policies. Fink has emphasized solutions that prop up the existing financial system, instead of shutting down or nationalizing banks, and lifting housing markets by using federal funds to buy mortgage securities from investors and toxic assets from banks. Solutions that benefit BlackRock and clients, by pushing up demand for mortgage bonds held in the firm’s fund portfolios. Resulting increase in the value of those funds, and new money the arrangement attracts from investors, means higher fees and fatter profits for BlackRock.

Fink boasts about his access. “I mean it is a great seal of approval,” Mr. Fink told Wall Street analysts in December, as he simultaneously coached the BUSH ADMINISTRATION - AND the incoming Obama team. “We are asked to help navigate new policy.”

BlackRock Chairman and CEO: Laurence D Fink, 55. Salary, $500,000 Bonus, $16,150,000

Vice Chairman and COO: Susan L. Wagner, 59. Salary, $250,000. Bonus, $2,000,000

Vice Chairman and Global Chief Investment Officer - Equity: Robert C. (Bob) Doll, 54. Salary, $400,000. Bonus, $13,875,000.

Does anybody remember when the proposed TARP was first voted on? It failed in the Senate because the majority repubs feared “Nationalizing” the banks. The “BlackRock” solution avoided that happening and pretty much guarantied, at the end of the day the Banks would be solvent - even if the Country wasn’t! So as usual, we are mad at the wrong people about the wrong things!


Now I have a question. Has anybody read Public Law 110-343, for the enacted rescue, Troubled Assets Relief Program? Are we stuck in this situation because of guidelines actually written into the Law? Is that what it took to get those Senate repubs off the fence and vote for the Law? OK, I know, it wasn’t just the repubs, but at that time, they WERE the majority in the Senate, so it does look a bit suspicious, although you can’t find a repub today who will admit they voted for the TARP.

Speaking of Bush, repubs and LOBBYING:

- 17 former cabinet officials hold positions with a total of 119 companies.

- 17 former officials hold positions with 65 companies that lobby the federal government.

- 15 former officials hold positions with 40 companies that lobby those officials’ former agencies.

- 9 former cabinet members hold positions with 15 companies that began or resumed lobbying the former officials’ agencies after those officials joined the companies.

Political recycling.

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By Texacrat, May 20, 2009 at 7:51 am Link to this comment

There is a new song out by Blue October (Dirt Room) that is very fitting of the anger of the citizens.  Listen to it if you get a chance.  Here is the chorus:
“You think you own me
You should have known me
You took the future and the food off my family’s plate
You think you’ll use me
I’m stronger than you
You take my money, but it’s useless
We’ll see what I do to you
Look what I do to you”

I am amazed that we keep taking this s&^t the greedy bastards dish out.

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By Shift, May 20, 2009 at 7:08 am Link to this comment

The “crush” of greed is resting firmly on homeless and jobless Americans.  Broken families, broken dreams, broken everything.  A dystopia of growing proportions is feeding voraciously. Shocked, depressed, and suffering in ever greater numbers, the people quietly endure and die. Hungry, no medicine, no shelter, no work, no way to live.

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By dihey, May 20, 2009 at 4:42 am Link to this comment

If Truthdig could reprint comments made during the onset of “bailout” you would find that I stated: “this will become the greatest illegal money-grabbing scandal ever in US history”. Yes, by far the greatest scandal ever but one that will never be revealed or admitted by Hot-Air-Balloon Obama.
Fortunately I am so old that I will be long dead and buried when my children and grandchildren will suffer from the misrule of this intelligent idiot.

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By afif.elias, May 20, 2009 at 4:27 am Link to this comment
(Unregistered commenter)

It is the most government in the world.  The government give those crooks more money and leverage over our economy.  How much can we, american can stand such lousy government?  We need new sytem that put the average Joe ahead of the criminal enterprises.  Wake up,the american people deserve better, all we have a system of corruption.  We need a party looking for the aVERAGE jOE.

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By thebeerdoctor, May 20, 2009 at 3:59 am Link to this comment

As Joe Bageant has pointed out: “The system IS the problem.” Watching Newsweek (perhaps that should be Newsweak) editor Jon Meacham, talk about his one on one interview with President Obama, I was reminded once again that there is no fourth estate. The silly, blubbering “imagineering” by both men, during the Charlie Rose interview, was an embarrassment to any intelligent viewer.
When they got to the part concerning Treasury Secretary Geithner, the silliness factor was off the dial. From Meacham I learned that T-bill Timmy is totally opposed to having the government set executive compensation limits (for the rest of us folks out of the loop, that means the dough ray me), regardless of the fact that it is that very same government which is providing their present, luxurious meal ticket.
There is no such thing as excessive chutzpah when it comes to the American bankster system.

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By Gloria Picchetti, May 20, 2009 at 3:22 am Link to this comment
(Unregistered commenter)

Instead of demanding accountability and pay back we re-upped for more financial gang bang by the politicians and the wealthy. Thanks.

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By coloradokarl, May 20, 2009 at 3:20 am Link to this comment

Buy a year supply of food,medicine, a big dog, a generator, a gun, learn to garden, stash some gasoline, get to know your neighbors…............

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By jerry gates, May 20, 2009 at 3:09 am Link to this comment
(Unregistered commenter)

Well, well, well, what have we here, Mr Giethner, recidivism? Incest? Insider conflicts of interest, parasitic predation and destruction of home values as punishment for Joe and Mary not being rich enough to afford you grifters lame offerings of evil finacialization of their delinquency?


    Popular schemes that make money on others misery are the way of life for hedgefund managers. They know much of how it all works and are tantalizingly brilliant when it comes to preying on any loophole of empowerment of usery. The American raptor class of vulture investment are the class of the demons which raped the worlds treasuries, robbed the nations coffers for prop ups of their clown suited cadres disastrous dealings with European and Asian entrepreneurs in US markets of derivatives. They are jerks with nice trophy wives, ten cars five homes and every possible trapping of excessive wealth but yet these hedge fund and vulture raptors of economic downturns lack a certain quality in their lives which makes them vulnerable to becoming the tool of this nation’s affinity for capitalism and it’s ravages.

  It takes a village to raise a child properly and if this is the Nations Village and the children are the treasury, the fed and the secretary of commerce need to be lobotomized as indecent reprobates with no moral compass. This “village” is sparing the rod and spoiling the children wit lavish prizes for being monsters of greed.

  As Barack Obama entered his new realm and picked his people to head his kingdoms enterprizes, lefties the world over bristled as the hairs on their necks rose to stiff attention and shook rattled and rolled, knowing that the fox had entered their hen house with verbal trickery and cunning slight of lip service to the masses, and the reality is that we , or at least some of us more trusting souls, did not see this coming in the man who promised change.

  From bad to worse is the new way of life we have today in the nations hottest new venue for raping and pillaging for profit, and this speaks well of a trend in US nationhood which needs to be looked into with grave misgivings as to where it leads from here, that realm is the privatization of the worlds infrastructures and machinations of empire.

  Globally speaking, this is a fine example of what happens to nations who sell their offices to money changers in the temples of God. Once the keys to the peoples “temple” are turned over to the most powerful purses and greediest thieves, thew point of being a nation is mute,the public trust is gone and the realm’s coffers are forever pillaged by rapists of predatory commercialization of national treasures and agencies.

  We see it at the Pentagon, The Commerce department, The Judiciary, State, and the DOD, which if we are wise we understand to be the kingpin of privitized global elite empowerment by Lockheed Martin, our private contractor running the entire military complex .

  It’s pretty much a done deal for Joe and Mary, they live at the pleasure of private firms who are reaping the entitlemnets of mass scale privitization of not only the US but of our allies Canada, Austrailia, the EU UK and Israel, all sold to world hegemony freaks like the vampires at the IMF, Worlfd bank and Rothschilds ilk, money has bought the worlds coffers into submission to what lefties call"the illuminati, and they called us conspiracy nuts? The chickens are coming home to roost Mr Obama, remember whom said that? I’m coming for you, as promised, buddy, batten down the hatches the citizens have you asshole Frankenstien, or is it “stein”, monster in the sites of their pitchforks and axes and are chasing their prey with a determined and fierce look in tired and menacing eyes. Nice work, Barack, but you “friends” are enemies of the people who voted for you.

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By ardee, May 20, 2009 at 3:04 am Link to this comment

I am angry, but I am not surprised. Did anyone familiar with both the causes of this crisis and the management provided by our government believe that a solution would not involve the further enrichment of the folks in charge, the wealthiest among us?

A company, owned in large part by the firm that owns the most toxic assets, will decide how much to pay for them, and what price to ask for them on the market. Am I the only one, besides the eloquent Mr. Scheer, both angry and frustrated?

Our government is wedded to a capitalist system, as are most of us in fact, sadly enough. Despite the mountain of evidence piling up each day that unregulated free market capitalism is a very bad idea if equality of opportunity and fairness for all our citizens is to be our goal, that is the only sort of solution we can expect from our leadership.

Mr. Geithner will go on to a career in the private sector , a CEO of some sleazy ripoff company with great influence among our politicians. But that which he has wrought will affect our children and our grandchildren for decades to come. Not that he will have any trouble sleeping I’m sure. Just as his boss, our “progressive” chief executive will continue to sell out the best interests of this country for his future mess of pottage with untroubled dreamless sleep.

They have no consciences, none of them.

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