ON A TOXIC ASSESSMENT

MONKEY SEE, MONKEY DO

Fortune magazine has an article worth reading on Blackrock, a major asset management institution that much of Wall Street is retaining to analyze their sub-prime exposures.  Here's a taste:

"AIG, Lehman Brothers, Fannie Mae, and Freddie Mac had all hired BlackRock over the past few months. As Fortune went to press, Treasury Secretary Hank Paulson had BlackRock on his short list to manage, well, your money - a chunk of the $700 billion bank bailout known as the Troubled Asset Relief Program, or TARP.
The reason so many CEOs have kept him on speed dial in recent months is simple: No other firm is trusted to pick through the exotic securities infecting banks' balance sheets and place an accurate value on them..."
"At a time when the credit-rating agencies like Moody's and Standard & Poor's have lost face, BlackRock's valuations have become a kind of de facto Good Housekeeping seal of approval that buyers and sellers of distressed assets trust.

"I think of it like Ghostbusters: When you have a problem, who you gonna call? BlackRock!" says Terrence Keely, a managing director at UBS..."

While much of this is good news for Blackrock, it's not been all smooth-sailing at the firm, as Fortune observers:

"BlackRock itself has not been unscathed: Its money market funds saw $50 billion withdrawn in the month of September. In the third quarter, assets in its fund-management business lost more than $100 billion, dropping from $1.4 trillion to $1.26 trillion. Its stock, trading at $113 on Oct. 23, is down 40% for the year."

My favorite line in the piece is by Blackrock CEO Larry Fink, who was in transit from the U.S. to Asia on September 13th, disconnecting him from critical market events.  As Fortune went on to describe it:

"When Fink landed in Singapore at 5 a.m. on Monday morning, he checked his BlackBerry and scanned the headlines: Lehman bankrupt, Merrill Lynch bought by Bank of America, AIG collapsing. "I felt like Charlton Heston landing on the Planet of the Apes*," says Fink. "My world had transformed."

So has ours, and the Fortune piece is a good way to survey some of the aftermath, and get a glimpse at how the globally shaky house of cards really got built.
*Image source.