Bloomberg News

BlackRock’s Fink Says Housing Structure More Unsound Now

May 20, 2014

BlackRock Inc. CEO Laurence D. Fink

Laurence Fink, chief executive of BlackRock Inc., listens during a panel session on day four of the World Economic Forum in Davos, Switzerland, on Jan. 25, 2014. Photographer: Jason Alden/Bloomberg

BlackRock Inc. (BLK:US)’s Chief Executive Officer Laurence D. Fink said the U.S. housing market is “structurally more unsound” today than before the financial crisis because it depends more on government-backed mortgage companies such as Fannie Mae and Freddie Mac.

“We’re more dependent on Fannie and Freddie than we were before the crisis,” Fink said today at a conference held by the Investment Company Institute in Washington, noting that he was one of the first Freddie Mac bond traders on Wall Street.

Fink co-founded BlackRock in 1988 after a career at First Boston Corp., now part of Credit Suisse AG, where he was known for his work slicing and pooling mortgages and selling them as bonds. Fink, who has built New York-based BlackRock into a $4.4 trillion money manager (BLK:US), said today that with strong underwriting standards, ownership of affordable homes can again become a foundation for American families.

The U.S. Senate Banking Committee is working to overhaul the housing-finance system, after casting a narrow vote this month to advance a bill that would wind down Fannie Mae (FNMA:US) and Freddie Mac. Current shareholders of Fannie Mae and Freddie Mac would be in line behind the U.S. for compensation from the wind-down.

Restructuring the mortgage market is the largest piece of unfinished U.S. business from the 2008 credit crisis, when regulators seized Fannie Mae and Freddie Mac as they neared insolvency. The companies, which buy mortgages and package them into securities, were bailed out with $187.5 billion from the Treasury and backed a growing share of mortgages as private capital dried up.

Only recently did they return to financial health as the housing market recovered, sparking calls from private shareholders including Bruce Berkowitz’s Fairholme Capital Management and hedge fund Perry Capital LLC to share in profits now going to taxpayers.

To contact the reporters on this story: Christopher Condon in Boston at ccondon4@bloomberg.net; Mary Childs in New York at mchilds5@bloomberg.net

To contact the editors responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net Sree Vidya Bhaktavatsalam


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Companies Mentioned

  • BLK
    (BlackRock Inc)
    • $357.61 USD
    • 0.59
    • 0.16%
  • FNMA
    (Federal National Mortgage Association)
    • $2.46 USD
    • -0.04
    • -1.43%
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