'Wise man of Wall Street' holds key to stress-test credibility
Published 31/03/2011 | 05:00
IF IRELAND'S banking stress tests fail, they won't fail because the firm behind them is too small or badly regarded by the markets.
Blackrock, led by reclusive US ex-bond trader Larry Fink, is quite simply the biggest money manager in the world, managing an extraordinary $12trn of assets. This is not far shy of everything produced in the US in a single year.
Mr Fink, for his part, is arguably the most powerful man in global finance, often described as the 'wise man of Wall Street'.
While enormously wealthy, Mr Fink is known for operating with fewer frills than most Wall Street CEOs. He travels on normal commercial jets and has been known to travel to Manhattan on a commuter train.
When the IMF/EU team arrived in Ireland in November, they wanted to take a fresh look at the Irish banks and their assets, but they were not prepared to use another Irish firm.
Blackrock Solutions were called in mainly because they have more experience than most firms in valuing assets realistically. While two other firms, Barclays Capital and Boston Consulting, have also been hired in, the seal of approval on the tests must come from Blackrock and in some ways indirectly from Mr Fink.
The Blackrock CEO, despite his influence over the markets, is not that well known in finance. His only regular television appearances tend to be on CNBC.
He started at the bottom of the heap on Wall Street after he graduated from a Californian university. He arrived in New York in 1976 with "turquoise jewellery and long hair''.
But Fink built up his reputation by dominating in the sleepy area of bond trading and years later he became famous for inventing securitisation -- where banks package up individual loans and sell them off to investors in chunks.
This activity transformed the face of finance, although it later became controversial when it was used too recklessly in the US sub-prime market.
Despite this, Fink was regarded at the time as introducing one of the most innovative new forms of finance seen since World War II.
Fink's reputation remains very high and his pronouncements on bonds and shares truly move markets. Ireland will now hope that some of his market credibility will rub off on the country's banks.