BlackRock's Peter Fisher on When the Pain Will End

"The authorities have got to close those firms that are not going to be survivors.…We can't wait around for consolidation"

by Maria Bartiromo

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As the struggle to contain the worst Wall Street wildfire in decades continues, nonfinancial companies are showing the strains of a constricted credit market. For example, on Oct. 1 billionaire investor Warren Buffett pumped $3 billion into GE (GE), giving the company a liquidity cushion as lending dries up. And on Oct. 7 the Federal Reserve announced its intention to buy short-term debt issued by corporations after top-rated AT&T (T) was unable to raise money in the commercial paper market. To make sense of what feels like endless economic turmoil, I talked with Peter Fisher, co-head of portfolio management at the investment firm BlackRock (BLK), which seems to be sailing through the crisis. Fisher is also a former Treasury Under Secretary for domestic finance and spent 15 years at the Federal Reserve Bank of New York.

MARIA BARTIROMO

How would you describe where we are today?

PETER FISHER

The fourth quarter jumped off with both AT&T and GE not being able to roll over their commercial paper, telling us that two premier names of Corporate America couldn't get the short-term financing they were looking for. That's the most extreme expression of the unwillingness of the financial community to lend. If GE has to sell a piece of itself to roll its short-term credit, other companies are going to find the cost of short-term financing prohibitive.

How long will it take to loosen credit markets up and get stability back?

This fourth quarter is going to be very hard. We just got off to a painful start. It's going to be several quarters from now, the middle of next year.

Are the Fed, the Treasury, and the global central banks headed down the right road, or are they perhaps creating new problems in the rush to shore up world credit markets?

I think there's a dilemma. It's important for them to step in, but it's also important for them to do this in a way that instills confidence in other financial institutions. And that's what we're still struggling with: Where do we start to find a bottom? The Citi-Wachovia, then Wells Fargo-Wachovia deal, that may be a kind of turning point, where Wells Fargo (WFC) is prepared to step up and say they don't need any government support. We need a few more episodes like that.