Bloomberg reports today that former
Treasury Department adviser and Goldman Sachs banker Kendrick Wilson III has
been hired by BlackRock, a global investment firm that manages more than $3
trillion in assets. While it may not come as a huge surprise, POGO finds Wilson’s move through the
revolving door to be particularly troubling given the close relationship BlackRock
has enjoyed with Treasury throughout the financial crisis.
Wilson came to Treasury in 2008 to serve as adviser to a fellow Goldman Sachs alum, then-Treasury Secretary Hank Paulson (as President Bush, Wilson’s former business school classmate, put it at the time: “Kenny, your country needs you”). While at Goldman Sachs, Wilson had helped to arrange a number of deals in response to the financial crisis, including Countrywide’s sale to Bank of America. At BlackRock, he will now be working “to support client relationships” and to assist the executive management team, according to the company’s press release.
One of BlackRock’s major clients in recent years has been the federal government. As the government developed its programs to address the toxic assets that were at the heart of the financial crisis, BlackRock quickly became the go-to firm for advice and support thanks to its expertise in asset valuation. BlackRock has served as an asset manager for all three of the Federal Reserve Bank of New York’s Maiden Lane facilities, which were formed to facilitate JPMorgan’s acquisition of Bear Stearns and to restructure the New York Fed’s support to AIG. (A recent New York Times investigation revealed that three of BlackRock’s contracts with the New York Fed were no-bid, including one in which fees were not established until after the contract was awarded.) BlackRock has also provided analytics support for the New York Fed’s $1.25 trillion agency mortgage-backed securities purchase program, and is currently serving as an asset manager for the Public Private Investment Program, for which it has raised over $500 billion in private equity to purchase troubled assets from banks.
POGO has repeatedly raised concerns about the potential conflicts of interest that could arise due to the fact that BlackRock is managing and valuating similar types of assets for both the government and its private clients. We’ve also questioned why one firm has enjoyed such a cozy relationship with the government, as evidenced by the multiple no-bid contracts that were awarded to BlackRock by the New York Fed. Wilson certainly isn’t hiding the fact that he enjoyed a close relationship with BlackRock CEO Laurence Fink when he served at Treasury, telling Bloomberg that “[Fink] was an invaluable resource and it was great to have someone like him to reach out to when necessary.”
Of course, Wilson is hardly the only former Treasury official to spin through the revolving door. Just last month, former Interim Assistant Treasury Secretary for Financial Stability Neel Kashkari landed a job at the Pacific Investment Management Company (PIMCO), a firm that has also played a key role in the government’s financial stability programs. And as Treasury prepares to wind down the Troubled Asset Relief Program (TARP) in the coming months, it’s probably only a matter of time before the revolving door between Treasury and the financial services industry spins yet again.
-- Michael Smallberg
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