Government Hands Over Key
Advisory and
Decision-Making Power to Super Cartel
BlackRock -- The Super Cartel
- Peter Ewart -
The unfolding worldwide pandemic is bringing with
it a profound financial crisis. How the crisis
will be dealt with is a
question on the minds of working people around the
world. In Canada,
working people face the additional complication
that as yet, they do
not set the direction of the economy, which is
controlled by a
financial oligarchy and governments in their
service.
A financial crisis is itself nothing new; crises
are inherent to the capitalist system espoused by
the financial
oligarchy. To prop itself up, as the financial
oligarchy lurches from
crisis to crisis, its instruments and forms of
organization mutate and
change, like creatures from the Black Lagoon.[1] For example,
out
of the crises and corruption of the late 19th
century came the merging
of banking and industrial capital and the giant
trusts and monopolies
of the Robber Barons. And out of a cabal of
leading U.S bankers on
Jekyll Island in 1910 rose the Federal Reserve. In
the 1990s, came the
financial de-regulation of the banking sector and
the welding back
together, Frankenstein-style, of investment and
commercial banking
which contributed in a negative way to the
sub-prime mortgage crisis
and the Great Recession of 2008. And most
recently, there is the "warm
and fuzzy" statement from the U.S. Business
Roundtable that the big
corporations are responsible to all stakeholders,
rather than the
previous Milton Friedman configuration of only
being accountable to
shareholders.
In the midst of these crises and mutations, often
one particular financial institution ends up at
the top of the heap. At
the beginning of the 20th century, it was the
mammoth J.P. Morgan bank.[2] In 2008, it was
Goldman Sachs, notorious for shorting its own
customers. In 2020, it is
BlackRock, the asset manager, shadow bank and
super-cartel, which has
obtained unprecedented power and authority over
handing out trillions
of public dollars in bailout funds from the U.S.
Treasury, as well as
being appointed key advisor to the Bank of Canada
in its bailout
program.
Founded in 1988 by financier Larry Fink and
others, BlackRock has grown in leaps and bounds
since then, its assets
under management now amounting to $7.4 trillion,
as well as another $20
trillion through Aladdin, its financial risk
software platform. It has
offices in 30 countries, clients in another 200,
and is by far the
largest asset manager and shadow bank in the
world, with assets under
management greater than the GDP of any country.
BlackRock is the
largest private investor in weapons manufacturing
in the world, owns
more oil, gas and thermal coal reserves than
anyone else, and is the
largest exchange traded fund (ETF) provider. As of
2017, the firm was a
major shareholder in most of the top 300
corporations in North America
and Europe and a co-owner in 17,309 companies and
banks worldwide.[3]
The financial crisis of 2008 proved to be a huge
windfall for the company when the U.S. government
contracted with
BlackRock to oversee the massive bailout of
failing banks and other
financial institutions which had been peddling
toxic securities. There
was some irony in this in that BlackRock itself
had played an important
role in paving the way for this very same crisis
by pushing for
de-regulation of the banking sector in the 1990s,
as well as promoting
the toxic securities market. Indeed, an inverse
relationship appears to
be at work. As BlackRock has swollen in size like
a modern-day version
of the Hindenburg blimp, the incomes of workers,
small businesses, and
other sections of people in the U.S. and Canada
have stagnated or
shrunk.
It is a sign of the times that most big banks and
financial institutions in the U.S. and elsewhere
are clamouring to be
designated as "systemically important financial
institutions" (SIFI) in
order to be eligible for bailouts of public
dollars from the U.S.
Treasury and other Central Banks. However,
BlackRock is an exception.
Instead, it has strongly resisted being designated
a SIFI. And there is
a telling reason for that. To become a SIFI means
that BlackRock would
have to come under some government regulatory
authority such as the Dodd-Frank Banking Act of 2010
which was brought in to provide a minimum of
regulation over the
out-of-control financial institutions that
precipitated the 2008
crisis. For BlackRock, the largest shadow bank in
the world, even a
small bit of regulation over its activities is too
much.
Thus, while many financial institutions are
limited to some extent by government regulation,
BlackRock and other
pirate "asset managers," sail the murky waters of
an unregulated
financial world. There is an even more inherent
instability in the
shadow banking sector than in that of traditional
banking. Unfettered
by regulations, shadow banks often engage in risky
behaviour that is
not backed up by reserves, resulting in dangerous
levels of financial
leverage, overstretch and debt.[4]
Like bombs, these shadow entities lie deep within
the financial system
waiting to explode, enriching financiers but
destabilizing entire
economies and wreaking havoc in the lives of
millions, as happened in
the 2008 Great Recession and other crises.
 When such crises
emerge, BlackRock and the financial oligarchy as a
whole, advocate fire
hosing trillions of dollars of public money into
the hands of the big
banks and corporations, either directly or
indirectly, thus diverting
funds away from health care, education, social
services, and other
areas of physical and social infrastructure. In
charge of this "fire
hosing," of course, are the private financial
institutions, and at the
head these days is BlackRock.
BlackRock's power and authority come not just
from
its sheer size, but from the fact that it
constitutes, as one analyst
puts it, a virtual "fourth branch of government,"[5] or, as some
might
say, the "first branch." From the beginning, a key
part of BlackRock's
strategy has been to recruit top state officials
from around the world
on an "in and out" basis. One year they might be
working for
government, the next year for BlackRock. And
vice-versa. For instance,
Jean Boivin is currently the head of BlackRock's
Investment Institute,
but formerly served as Deputy Governor of the Bank
of Canada and
Associate Deputy Finance Minister. In addition,
BlackRock has on its
staff many former White House officials and
routinely advises top
government and central bank officials in North
America and Europe. In
this and myriad other ways, the lines are
obliterated between state and
private corporation, with the state being reduced
to an ancillary or
adjunct role.
Another important source of BlackRock's power is
that it constitutes a de
facto "super-cartel," even though
regulatory officials
have not dared so far to designate it as such.[6] In recent
years,
asset managers and shadow banks like BlackRock,
Vanguard and State
Street have become the first tier organizations of
the financial
oligarchy, displacing even the huge investment
banks like Goldman
Sachs. Together, the "Big Three" of BlackRock,
Vanguard and State
Street dominate three-quarters of the
multi-trillion world market of
index funds. Their assets under management amount
to more than all the
sovereign wealth funds on earth and over three
times the global hedge
fund industry.
In cartel-like fashion, the Big Three have
interconnected ownership. For example, Vanguard
and State Street own
substantial shares in BlackRock, and together the
Big Three are "the
largest single shareholder in almost 90 per cent
of S&P firms,
including Apple, Microsoft, ExxonMobil, General
Electric and
Coca-Cola." According to various analysts, the Big
Three coordinate
their votes at shareholder meetings through
centralized corporate
governance departments.[7]
In corporate mergers, the Big Three are often on
both sides of a deal, i.e. they are invested in
both the buyer and the
seller, which gives them "superior two-sided
information compared with
those who operate only on one side of the deal."[8] On the banking
side, the Big Three are also co-owners of many of
the same big banks
and thus constitute other loops of huge financial
cartels. As major
joint shareholders, they even dominate financial
rating agencies, such
as S&P and Moody's, which determine credit
ratings and can have
a huge impact on the viability of corporations and
governments.[9]
Cartels like the Big Three constitute an alliance
of rival oligarchs that work together against
competitors and other
sectors of business and industry, and present a
common front against
their own workers and employees, and the
population at large. Their aim
is to obtain maximum profits and dominate the
market and, to do so,
they engage in anti-competitive, monopolistic
behaviour, including
price fixing, bid rigging, reductions in output,
and suppression of
wages. In so doing, they have run roughshod over
numerous conflict of
interest and regulatory norms to the point that
such norms no longer
exist in the financial world and a naked law of
the jungle prevails.
 In its most
recent activity, BlackRock has formed cartel-like
relations with the
U.S. government and the Federal Reserve, creating
what looks to be a
giant public-private partnership cartel that hands
out public funds to chosen financial
institutions and corporations in the largest
transfer of wealth in
history. Early returns show that BlackRock is
dishing out the largest
amount of money (48 per cent) to the very same ETF
funds it runs.[10]
Nonetheless, the largest financial organization
and the largest central bank in the world cannot
overcome the black
hole of contradictions and crises at the heart of
the financial system.
They only serve to sharpen these.
Despite its blimp-like size, an asset manager
like
BlackRock does not create new value in any way but
rather represents
yet another layer of the oligarchic skimming off
of the new value
already created by the workers and productive
forces in society. Thus
it has a parasitic relationship to these forces.
However, in their sheer size, BlackRock and the
Big Three are capable of destabilizing the entire
economy of countries
through "herding behavior" and other cartel-type
activities such as
happened with the frenzied peddling of toxic
securities in the U.S. by
the financial oligarchs back in 2008. As such,
they represent alien,
unaccountable bodies which pose a threat and
ongoing danger to society.
A fundamental task for the working people in the
coming years will be
to step up the fight to change the aim and
direction of the economy so
it is removed from the clutches of the financial
oligarchy and its
institutions and brought under the control of a
public authority
accountable to the people. Such an economy will
have no place for
parasitic cartels like the Blackrock looting
machine to exist.
Notes
1. Creature
from the Black Lagoon, 1954 U.S. movie.
2. "The
dawn of the BlackRock era," by Alexander Sammon, The
American
Prospect, May 15, 2020.
3. The
Capitalists of the 21st Century, by Werner
Rugemer
(Tredition, 2019).
4.
"Shadow Banking," Wikipedia, June 2, 2020.
5. "In
Fink we trust: BlackRock is now 'fourth branch of
government,'" by
Annie Massa and Caleb Melby, Bloomberg, May 21,
2020.
6. The
Capitalists of the 21st Century, by Werner
Rugemer.
7.
"BlackRock, Vanguard and State Street own
corporate America," by Jan
Fichtner, Eelke Heemskerk and Javier
Garcia-Bernardo, Ponderwall,
September 29, 2019.
8.
"Biggest deals of 2019 had BlackRock, Vanguard on
both sides," by Annie
Massa and David McLaughlin, Bloomberg, January 24,
2020.
9. The
Capitalists of the 21st Century, by Werner
Rugemer.
10.
"BlackRock rakes in big portion of Fed's ETF
investments," by Christine
Idzelis, Bloomberg, June 1, 2020.
This article was published in
Volume 50 Number 21 - June 13, 2020
Article Link:
Government Hands Over Key
Advisory and: BlackRock -- The Super Cartel - Peter Ewart
Website: www.cpcml.ca
Email: editor@cpcml.ca
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