(Bloomberg)—BlackRock Inc. was hired by US regulators to help sell $114 billion in securities it amassed from failed lenders Signature Bank and Silicon Valley Bank, returning the asset-manager to its role as an adviser to the government in times of crisis.
The firm will conduct sales of $27 billion in securities from Signature and $87 billion from SVB Financial Group’s Silicon Valley Bank, the Federal Deposit Insurance Corp. said in a statement Wednesday. The holdings are mostly agency mortgage-backed securities, collateralized mortgage obligations and commercial MBS that remained after the government sold the rest of the firms in March, the FDIC said.
The goal is for the sales to be “gradual and orderly,” the FDIC said, and that authorities seek “to minimize the potential for any adverse impact on market functioning by taking into account daily liquidity and trading conditions.”
A spokesperson for New York-based BlackRock declined to comment.
Washington has a history of turning to BlackRock and Chief Executive Officer Larry Fink in moments of need, given the firm’s scale and reach across global markets, with $8.6 trillion of client assets and experience managing complex debt.
In the aftermath of the 2008 financial crisis, the Federal Reserve and Treasury Department awarded contracts to BlackRock to manage $130 billion of bad debt formerly on the books of Bear Stearns and American International Group Inc. The Fed turned to BlackRock to help oversee debt-buying programs to help stabilize the economy at the onset of the pandemic in 2020.
BlackRock’s Financial Markets Advisory Group was established in 2008 to provide advice to governments, central banks and financial institutions. Co-heads Ben Leax and Brandon Hall lead a staff of 200 in New York, London, Frankfurt, Budapest, the Middle East and elsewhere.
BlackRock is among contractors the FDIC had brought on as of last May for strategic financial advisory and consulting work on bank failures. Others include Houlihan Lokey Inc., Rothschild Inc. and Piper Sandler & Co., which advised the FDIC on SVB.
Signature and Silicon Valley Bank were among three US lenders that collapsed in rapid succession last month under the weight of deposit withdrawals. The FDIC was appointed receiver for both firms last month.
First Citizens BancShares Inc. agreed to buy Silicon Valley Bank, which unraveled in less than 48 hours in the biggest US bank failure in more than a decade. Signature’s collapse quickly followed, and its deposits and some of its loans were later purchased from the FDIC by New York Community Bancorp’s Flagstar Bank.
While the deals included deposits and bank branches, the buyers were less willing to take on securities purchased by Signature and Silicon Valley Bank when borrowing costs were low, and that have dropped in value amid interest-rate hikes by the Fed. That left the billions of dollars of devalued securities and mortgage obligations in the FDIC’s hands.
--With assistance from Sam Nagarajan and Shelley Robinson.
© 2023 Bloomberg L.P.
