Global systemic risk is back in fashion, as Blackrock buys Barclays Global Investors, creating a combined $2.8T balance sheet, much larger than the US Federal Reserve. If this newly formed titan ever had large its own liquidity problem it could threaten to once again bring down the world financial system.
Of course Blackrock has a number of curious aspects to it as well. Merrill Lynch had a 50% stake which Bank of America gobbled up along with Merrill in a backroom deal with Uncle Sam. Now Bank of America has a large (supposedly non-voting and non-influential) stake in this behemoth. I believe this is cause for concern, because among other duties, Blackrock helps the Federal Reserve manage some of its assets and performs consulting as well.
How does Bank of America have a stake in a company that has some influence on the value of its assets in the eyes of what is supposed to be an independent central bank? This question has come up in congressional hearings and been asked by pundits as well as traders.
Apparently there’s absolutely no rules to the game as long as the biggest banks survive.. at least for now.