The BlackRock Inc. chief executive avoided taking over the helm of Merrill Lynch -- something John Thain probably wishes he had done. Fink's firm emerged from the financial crisis as the Federal Reserve's favorite private money manager, with BlackRock getting the lion's share of the government's work for managing troubled assets. And the $13 billion deal Fink just reached with Barclays Global Investors has turned BlackRock into the outright titan of the asset management world with $2.7 trillion in other peoples' money under management.
It's often been said Jamie Dimon is the new king of Wall Street. But one can argue that the 56-year-old Fink, who started BlackRock as a small bond investment shop two decades ago, can also rightfully lay claim to that honor. Even as the Obama administration is about to announce its plan for managing so-called "too big to fail" financial institutions, Fink's BlackRock is getting bigger and more consequential than ever.
The deal puts BlackRock's fingers firmly into every significant asset class-corporate bonds, mortgage-backed securities, mutual funds, stocks, cash, hedge funds and now the ever popular exchange traded funds -- a stock index-like security. Barclays now joins Bank of America and PNC Financial in having major equity stakes in BlackRock and a vested interest in the money manager's long-term health.
The danger, of course, in creating a money management firm the size of BlackRock is that it puts a lot of people's retirements at risk if the firm were to collapse, or its investment funds were to implode. To put BlackRock's size in perspective, it's now bigger than the combined assets managed by mutual fund giant Fidelity Investments and the entire hedge fund industry.
Wall Street historian Charles Geisst says money managers traditionally have not posed the same kind of risk to the financial system as a commercial bank or investment. But Geisst worries whether Wall Street is laying the groundwork for a new kind of systemic risk, if the BlackRock deal with Barclays encourages a consolidation of too much pension and retirement money into the hands of just a few players. "We could have big problems with these huge asset managers down the road," he says.