The world’s largest asset manager won’t be making a mint off the Federal Reserve.
BlackRock, the firm hired by the Fed this week to help manage the purchase of billions of dollars worth of bonds, will earn relatively modest fees for its work, according to a contract posted Friday.
The firm, which manages nearly $7 trillion in assets, will earn no more than $7.75 million per year for the main bond portfolio it will manage. It will also be prohibited from earning fees on the sale of bond-backed exchange traded funds, a segment of the market it dominates.
The contract, posted on the website for the New York Federal Reserve, was made public just days after the Fed announced it hired BlackRock’s advisory business to run three programs aimed at stabilizing a corporate bond market that has been roiled by the economic fallout of the coronavirus pandemic. Contracts for the other two programs have not been released.
The disclosure of the deal’s terms was a sharp contrast to the secretive way a similar arrangement was handled during the 2008 financial crisis, when BlackRock and a few other firms were hired to manage and advise on programs aimed at stabilizing the markets. Those contracts were not made public until months later and, in some cases, the fees paid to those firms were never disclosed.
Back then, the New York Federal Reserve retained BlackRock to help oversee billions of dollars in ailing assets left over after the collapses of Bear Stearns and American International Group. BlackRock helped price and sell those assets for the government at the same time it was helping private clients buy similar assets, which prompted criticism from lawmakers and others who worried about coziness between Wall Street and Washington.
This time, the terms are more clear. BlackRock will start out earning about two cents on every $100 for each bond purchase, but the quarterly fee on those additional purchases will be reduced as the portfolio grows beyond $20 billion. Once the portfolio exceeds $50 billion, BlackRock will not earn additional fees for managing those surplus bond purchases.
The contract also contains language requiring BlackRock to “maintain and enforce corporatewide policies and procedures providing for information barriers and addressing potential conflicts of interest.”
Central bankers also set terms that prohibit BlackRock’s from earning fees from the purchase of bond-backed E.T.F.s. BlackRock is as one of the world’s biggest originator of E.T.F.s and would have otherwise stood to benefit from a Fed program to buy E.T.F.s that are backed by corporate bonds.
The term sheet posted by the New York Fed also said “BlackRock will not earn any other fees or income, including from securities lending, in connection with the facility’s purchase of E.T.F.s.”
Dennis Kelleher, chief executive of Better Markets, a nonprofit group that supports stringent financial regulation, said it appeared that Jay Powell, the Federal Reserve chairman, was taking steps to show the public and elected leaders it wanted to earn their trust.
“They learned the lesson from the last time that needless secrecy breeds suspicion and destroys credibility,” he said.
Updated March 24, 2020
It seems to spread very easily from person to person, especially in homes, hospitals and other confined spaces. The pathogen can be carried on tiny respiratory droplets that fall as they are coughed or sneezed out. It may also be transmitted when we touch a contaminated surface and then touch our face.
No. The first testing in humans of an experimental vaccine began in mid-March. Such rapid development of a potential vaccine is unprecedented, but even if it is proved safe and effective, it probably will not be available for 12 to18 months.
Unlike the flu, there is no known treatment or vaccine, and little is known about this particular virus so far. It seems to be more lethal than the flu, but the numbers are still uncertain. And it hits the elderly and those with underlying conditions — not just those with respiratory diseases — particularly hard.
If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.
If you’re sick and you think you’ve been exposed to the new coronavirus, the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested.
If the family member doesn’t need hospitalization and can be cared for at home, you should help him or her with basic needs and monitor the symptoms, while also keeping as much distance as possible, according to guidelines issued by the C.D.C. If there’s space, the sick family member should stay in a separate room and use a separate bathroom. If masks are available, both the sick person and the caregiver should wear them when the caregiver enters the room. Make sure not to share any dishes or other household items and to regularly clean surfaces like counters, doorknobs, toilets and tables. Don’t forget to wash your hands frequently.
No. Unless you’re already infected, or caring for someone who is, a face mask is not recommended. And stockpiling them will make it harder for nurses and other workers to access the resources they need to help on the front lines.
Plan two weeks of meals if possible. But people should not hoard food or supplies. Despite the empty shelves, the supply chain remains strong. And remember to wipe the handle of the grocery cart with a disinfecting wipe and wash your hands as soon as you get home.
Yes, but make sure you keep six feet of distance between you and people who don’t live in your home. Even if you just hang out in a park, rather than go for a jog or a walk, getting some fresh air, and hopefully sunshine, is a good idea.
That’s not a good idea. Even if you’re retired, having a balanced portfolio of stocks and bonds so that your money keeps up with inflation, or even grows, makes sense. But retirees may want to think about having enough cash set aside for a year’s worth of living expenses and big payments needed over the next five years.
Watching your balance go up and down can be scary. You may be wondering if you should decrease your contributions — don’t! If your employer matches any part of your contributions, make sure you’re at least saving as much as you can to get that “free money.”