Blackrock

(But yes, @Nouriel, we need central banks, and moral hazard and FRB did not exist before 1913...Q.E.D., right?)

Bank of America may be about to part with more money than it has earned since 2008 in what will soon be the biggest financial settlement in the industry to date According to the WSJ, the Charlotte, NC-based bank is preparing to pay $8.5 billion to settle mortgage (mis)representation claims (aka the Mortgage putback issue) brought on by such high profile figures as BlackRock, Pimco, MetLife and, of course, the Federal Reserve, previously discussed on Zero Hedge. "A deal would end a nine-month fight with a group of 22 investors that hold more than $56 billion in mortgage-backed securities at the center of the dispute, including giant money manager BlackRock Inc., insurer MetLife Inc. and the Federal Reserve Bank of New York." Keep in mind that this is actually not good news for the bank, contrary to what the company's stock is doing after hours, as this still keeps the company exposed to a multitude of other rep and warranty litigation (which will now be largely underreserved), not to mention fraudclosure issues, which are totally unrelated, and which will plague the bank for years and years. Lastly, BAC is largley underreserved (see below) for a settlement of this size which means its Tier 1 capital ratio will likely be impacted due to a major outflow of cash.

That over the past few years there has been a substantial push to expose some of the chicanery at the SLV iShares silver ETF, especially among the non-indoctrinated blogosphere, is no surprise. After all fear of a massive paper silver wipe out is not only the reason for success of Eric Sprott's physical silver ETF, but for the massive and consistently record premium over NAV of the PSLV. Yet up until now, we were not all that concerned about such allegations (despite having written about this ourselves on several occasions). After all, the one thing that would essentially validate such, at time exorbitant, allegations, was missing: a formal refutation. That is, until now. Kevin Feldman, a Managing Director in the iShares unit of BlackRock, has just blasted out the following email which we were lucky enough to become privy to. Basically, we now have the one and only thing we were missing: an official denial of all the "rumors." It may now be time to abandon the SS SLV, because if this letter is the best defense iShares can muster, then SLV holders may be in trouble. But better confirmation than. And leaving the content of the letter aside, its existence, and that Blackstone itself is willing to engage the tinfoil hat clad blogosphere, is the biggest red flag so far...

We have now officially gone full circle. Even as CMBS delinquencies are at all time highs, Wall Street's scramble to generate yield on other people's money (which will be completely lost once the liquidity tsunami ends) is back in 5th gear, as securitizations backed by commercial mortgages are flying off the shelves. It is so bad, that even S&P (!) is questioning the sanity of all those using LP capital to sign the dotted line in pursuit of a few quarters of yield. “There’s some crap getting done,” David Jacob, an executive managing director at credit-rating company S&P, said today during a panel discussion at the American Securitization Forum trade group’s annual meeting in Orlando, Florida. “It’s surprising to me this early in the cycle that some of that could be happening.” Don't be surprised David, after all it is your company that is rating it AAA (we realize you, too, have to eat), and never ever forget that if this was merely an indication of unseen market exuberance the Chairsatan would have long since popped the latest (and luckily last - after this one, there will be no one left to bail out the world) bubble. And someone else scratching their head at the current round of irrational exuberance that would make the dot com era look like dress rehearsal for "Spiderman: The Musical" is none other than some guy from Blackrock. "It’s been surprising how quickly investors have returned to
accepting transactions with numerous AAA rated classes, said
Blewitt, co-head of securitized assets at BlackRock, the world’s
largest money manager. Some bond buyers may not be scrutinizing
offering documents closely enough to find “hidden” dangers, he
said. “I don’t think we’re going back to the Ponzi finance
excesses that we had in 2006 and 2007 just yet, but when I get a
little bit scared is when I see the old game of, ‘These are not
your droids, look over there, not over here." Blewitt is right: the current round of 'Ponzi finance excesses' is like nothing ever seen before. But then again we have QE2 (then 3, 4, 5, 6, 7, 8, etc) to mask just how enamored with droid chasing we all are. When this last bubble pops, it will be monumental.

In what is the latest death knell for the traditional Wall Street non-monopolistic sell-side business, last night we read in the FT, with little surprise, that ETF behemoth (following its purchase of Barclays Global) and arguably the world's largest asset manager, bigger even that Pimco, Blackrock is launching an internal trading platform which will compete with the traditional wall street institutional sales and trading model. In essence, courtesy of its massive internal stock inventory, BlackRock will be able to internalize buyer and seller order flow, allowing for much cheaper transaction costs, and create an open "dark pool" to paying customers, which will soon become the go to marketplace for all. And thanks to the cheap transactions costs, BlackRock will be able to pull even more order flow from traditional trading venues, creating an economy of scale borne out of its increasingly greater monopoly status in stocks. In essence, Wall Street is about to see yet another monopoly power stretch its wings and become the go-to flow trader for equities. And this should work quite well: after all it is none other than Goldman who already cornered the derivatives and fixed income markets, courtesy of the first monopolistic land grab, which just so happens, involved the insolvency of Bear and Lehman.

A few days ago, we penned The BlackRock - Bank Of America Ownership Catch 22, in which we discussed the incestuous cross-onwership relationship between the two companies. Then we said: "It is well known that Bank of America owns 34% of BlackRock via a legacy
position inherited from Merrill Lynch, arguably the most valuable part
of the business. As of today, the stake is worth around $11.5 billion.
Yet what may be a little less known is that BlackRock has also returned
the favor, and is now the largest holder of Bank of America, owning 5.35% of the outstanding BAC shares, for a total value of $6.6 billion. Does
that mean that there is a wash in there somewhere? Who cares. But one
thing that certainly is involved, is a massive conflict of interest,
especially in the context of litigation. And a big question mark - to
claim that BlackRock is willing to impair a nearly $7 billion investment
is naive. Instead, due to the incestuous nature of Wall Street, and the
cross pollination of MBS holders, is today's action merely a ploy to
get some of the more "impacted" parties to promptly settle and eliminate
any possible future litigation? PIMCO, for one, and the FRBNY fir
another, have the most to lose if the MBS crisis escalates, and if all
MBS are unwound. Which means that somehow this is simply another
diversion, with the real action taking place somewhere." The action is indeed "elsewhere" - Charlie Gasparino has just reported that Larry Fink is seeking a partner to buy 35% of Bank of America. What better way to sweep all the problems underneath the rug than to just buy them all up...

It is well known that Bank of America owns 34% of BlackRock via a legacy position inherited from Merrill Lynch, arguably the most valuable part of the business. As of today, the stake is worth around $11.5 billion. Yet what may be a little less known is that BlackRock has also returned the favor, and is now the largest holder of Bank of America, owning 5.35% of the outstanding BAC shares, for a total value of $6.6 billion. Does that mean that there is a wash in there somewhere? Who cares. But one thing that certainly is involved, is a massive conflict of interest, especially in the context of litigation. And a big question mark - to claim that BlackRock is willing to impair a nearly $7 billion investment is naive. Instead, due to the incestuous nature of Wall Street, and the cross pollination of MBS holders, is today's action merely a ploy to get some of the more "impacted" parties to promptly settle and eliminate any possible future litigation? PIMCO, for one, and the FRBNY fir another, have the most to lose if the MBS crisis escalates, and if all MBS are unwound. Which means that somehow this is simply another diversion, with the real action taking place somewhere. We hope to figure it out before everyone has settled amicably and the whole fraudclosure is swept under the rug.

Putbacks, bitches! This headline that has just flashed, can not be right. Otherwise it would mean the New York Fed (and Bill Gross) is preparing to sink Bank of America with hundreds of billions of par MBS putbacks. It would however explain why PIMCO has been gobbling up MBS on margin in the past month as we highlighted. We will bring you more as we see it, because this could be a groundbreaking development.

Update: Blackrock joins too! The "soured mortgages" in question amount to $47 billion (to start). We are now just waiting for BofA to next demand TARP 2 and the circle jerk will be complete.

Update 2: Full Bloomberg story attached.

Reminder: Here is JPM's presentation on what the total putback risk is for the Big Banks. As the lawsuit seeks to putback $47 billion one wonders just how accurate JPM's estimate of a $55 billion max pain truly is...

Reminder 2: As our whistleblower pointed out earlier today, the issue of misrepresentation of all mortgage related items (not just titles) is precisely what would destroy the mortgage originators and servicers. Today, Countrywide, its former orange CEO, and Bank of America are the first to realize just how correct he or she was.

Blackrock Q4 outlook summary: "Dear Greater Fools - please come back! We need you, our ETF creation shares need you, our trillions in overrated investments need you!" From Bob Doll: "Equity valuations are attractive: We believe equities are underpriced at current levels. The tricky economic backdrop suggests a continued focus on high-quality equities, but also some allocation to cyclical areas of the market."

Well duh.

On June 30, 2010, Maiden Lane celebrated her second anniversary, though her composition was mark-to-markedly different than the $30 billion toxic brew of Bear Stearns assets with which she was originally stuffed. We first revealed the curious trading performed by BlackRock Financial Management on...

Just as Goldman's hope that the BP gusher's taking front page priority, especially in the aftermath of the rather amusing settlement between the firm and the SEC, was finally appearing to bear fruit as for the first time in over a year there was nothing relevant on the news front regarding the 200 West company, here comes Senator Chuck Grassley lobbing a grenade full of provocative and very much unanswered questions directed at the GAO, at Elizabeth Warren, and at Neil Barofsky that demand clear and prompt answers. We are also quite content that Blackrock and AIG once again manage to get themselves dirty.

In its latest update of Maiden Lane assets the Fed has marked the net value of the CDO-legacy portfolio at multi year highs. Yet at the same time, it, together with Blackrock, has stripped away 60% of the interest rate hedges previously protecting ML1 from a blow out in interest rates. We ask why the Fed is increasingly certain there is no risk of a violent widening in rates, and how can it be certain of this occurring, without continuing to actively manipulate the Treasury/MBS market way past the QE due date?

Apparently after losing Blackrock tens of billions through the firm's holdings of BP and various drillers, Bob Dolls has not only not been fired, but according to RanSquawk was heard somewhere (indicatively, not even CNBC wants to listen to his gibberish any more), saying that stocks are "pretty cheap." Good - he can buy up all the 330 million shares that the Bank of Norway is rumored to be selling. If Bob thinks stocks are pretty cheap here, we hope he has enough dry powder to LBO the entire market when the S&P is trading at 300 or lower.

In this brief interview with Morningstar, Doubleline's star MBS analyst, and the bane of TCW's existence, Jeff Gundlach, points out the glaringly obvious: i.e., that "if Citigroup was too big to fail, then so much greater is the risk for asset managers at a multiple of that market cap." Obviously the mortgage expert here is contemplating asset manager behemoths such as PIMCO and BlackRock, which have quietly become even more institutionalized within the fabric of the financial markets, than some of the TBTF banks. And without access to the Fed's discount window, liquidity threats to firms like PIMCO are exponentially greater than even for a bankrupt POS like Citigroup. No wonder Gross was offloading European sovereign debt with gusto as of last check. With total assets of over $1 trillion, saying that a failure by PIMCO, and by extension its Fed-unmoderatable counterparty risk, would have huge implications on the US financial system, is so obvious, that it is completely understandable that there is not one single provision in the Senator from Countrywide and the Congressman from Fannie's FinReg proposals on how to tackle this most recent threat to capital markets.

Bob Doll, Vice Chairman of BlackRock (BLK), the world's biggest money manager, appeared at CNBC on March 29 sharing his latest views with Ken Langone.