The Federal Reserve has enlisted the help of BlackRock Inc to coordinate its purchasing of $50bn (£42bn, €46bn) worth of commercial mortgage-backed securities every day this week.
“BlackRock was selected on a short-term basis”, the Federal Reserve Bank of New York said, “to serve as an investment manager after considering their expertise in trading and analysing agency CMBS in the secondary market, and robust operational and technological capabilities.”
BlackRock is the largest money manager in the world, with close to $7 trillion in assets under management and a market capitalisation of $50.69bn.
The world’s leading central bank has gone into overdrive in recent weeks, attempting to blunt the economic impact of the Covid-19 outbreak, which has ravaged the US. economy. Morgan Stanley and Goldman Sachs have predicted a 24-30 per cent drop in US GDP in the second quarter of 2020 with unemployment averaging 12.8 per cent during the same period.
To counteract this the Fed has cut interest rates to zero and injected trillions of dollars to improve the liquidity conditions in the US financial system.
As market confidence continued to tumble, the central bank announced on Monday, March 23, along with its move into the corporate bond market, the resumption of unlimited quantitative easing and packages to improve access to credit for small and medium-sized businesses.
The Fed’s selection of BlackRock “as a third-party vendor” has underlined the scale of the economic crisis triggered by the coronavirus outbreak. During the global financial crisis of 2008, the central bank similarly turned to the asset-manager to run portfolios of mortgage assets from AIG and Bear Stearns.