There’s a story told by a former employee of BlackRock, the kind we
all tell around the coffee machine. Larry Fink, CEO of the world’s most
powerful fund, is on his private plane heading for Europe. Above the
Atlantic, he asks the captain to make course for Germany. He calls his
regional manager in Frankfurt and demands a meeting with Angela Merkel,
if possible in five hours, after he lands.
The subordinate works like a man possessed but, in the end, doesn’t
get the desired meeting. He offers Mr Fink a consolation prize: the vice
president of the car manufacturer BMW, just for him. The meeting
kicks-off, the small talk has just got going when suddenly Larry Fink
takes out his phone and begins preparing his next meeting, leaving his
interlocutor lost for words. Such glibness on the part of its founder
illustrates the omnipotence of his company.
Son of a shoe shop manager and an English teacher, he founded his
company with a dozen colleagues 30 years ago, having learned his craft
in a New York investment bank. At the age of 65 he is a
multi-billionaire. His fund manages assets of $6,280 billion, a third of
them in Europe. The primary source of this money is pension funds,
principally those of Californian and New York state officials. All have
funded pensions and are hoping to see their own savings, already
supplemented by their employer, blossom in the financial markets under
The fund employs 13,900 people spread around 30 countries, tasked
with selling financial products or investing in new companies. But over
the years, and especially since the financial crisis, BlackRock has
expanded its power well beyond asset management. We find it as an
auditor of banks engaged by regulatory authorities and as an adviser to
states on privatisation. In the autumn of 2017, it was invited by the
French government to sit on the “comité Action publique 2022″ (CAP
2022), a kind of second Attali Commission, meant to sketch out the
future contours of the French state. Behind the scenes in Europe it is
very busy countering any attempt to increase regulation.
In Europe, BlackRock is a name that says very little to anyone beyond
the sphere of finance. The universe of asset managers and their obscure
index funds seems to be the preserve of insiders. But its power is
impressive. To question anyone involved in finance about BlackRock as to
whether they are merely administrators, or small or big players, or
stewards of wealth, is to run the risk of facing countless rejections,
sometimes civil, sometimes not so.
In France alone, the fund is a 5 to 10 % shareholder, via a string of
subsidiaries, of Eiffage, Danone, Vinci, Lagardère, but also of
Renault, Peugeot, Société Générale, Axa, Vivendi, Total, Sanofi,
Legrand, Schneider Electric, Veolia, Publicis, etc etc. BlackRock is a
shareholder, often the principal one, in at least 172 of the 525 French
companies listed on the stock exchange. And of 17,000 companies around
the world, at each general meeting of which it never fails to vote.
“As soon as BlackRock appears as one of your shareholders, your
company stands out from the crowd and gains a huge amount of prestige,”
says the journalist Grégoire Favet, who we’re used to seeing picking
through the details of French finance on the set of his BFM Business TV
show. “When you are Larry Fink, you can talk as equals with the director
of the IMF or a head of state. Mr. Fink has already been received twice
at the Élysée since the election of Emmanuel Macron,” says Mr Favet.
Paramedic rescue force during the financial crisis
Created in 1988, BlackRock gained its current power in the wake of
the 2008 financial crisis. With the fall of Lehman Brothers, Wall Street
was in the throes of free-fall: no one knew what thousands of their
financial portfolios contained, what was hidden behind the derivatives,
what was toxic and what was not, what was dangerous and what wasn’t.
BlackRock quickly understood how it could benefit from the situation.
Since its creation the firm has developed its own risk management tool,
called Aladdin. “It is able to analyse the risks of investing in any
stock, to highlight where to sell bonds to attract the best price, to
track all transactions, to bring together all the data and have to hand
information vital to investors,” explains the Financial Times.
Taking advantage of the panic, BlackRock put Aladdin at the disposal
of other financiers, for a price of course. But the fund also offered
its services to the financial authorities, who were seeking its help in
evaluating the health of large banks considered systemic: the investment
bank Bear Stearns for example, the insurance giant American
International Group and the financial conglomerate Citigroup. BlackRock
also picked up a contract to monitor Fannie Mae and Freddie Mac, the
public mortgage credit institutions that the federal government had just
As early as 2009, elected representatives however began posing
questions. “How is it,” asked Republican Senator Charles Grassley, “that
only one company is qualified to manage these assets recovered by the
government?” Auditing on behalf of the public sector, investing in the
private sector. Two self-evidently incompatible hats, but a mix of
functions that BlackRock now cleverly reproduces across Europe.
Adviser to European central banks
In 2011, the central bank of Ireland decided also to solicit
BlackRock Solutions, the consultancy arm of the fund, without a call for
tenders, to evaluate the state of the six main Irish banks. Three of
them had just been bailed out in panic by the state to avoid bankruptcy.
Crumbling under debt, Ireland had to call on Europe and the IMF in the
framework of an 85 billion euro “rescue” plan. It also wanted to conduct
“stress tests” to check the solidity of the banking environment in the
event of any new glitches.
Later, in the face of sceptical Irish deputies, the finance minister
at the time said he had appealed to BlackRock under pressure from
international institutions that had lent money to Ireland, grouped in
the so-called “Troika”, of euro crisis fame. These were the European
Central Bank (ECB), the European Union and the IMF. It was a “gigantic
mission,” acknowledged Larry Fink. “The largest ever entrusted to us by a
BlackRock Solutions, the consulting branch, thus acquired new
references. Its help would be sought again in 2012, and again in 2013,
to assess the capital requirements of Irish banks. On November 4 2013,
the BlackRock Fund purchased 3% of one of these banks, Bank of Ireland,
and reported holding 162 billion euros in assets domiciled in Ireland.
Chirac’s former adviser at the head of the French branch
In Greece in 2011, also under pressure from the Troika, the Central
Bank of Greece called on BlackRock Solutions to dissect the loan
portfolios of 18 banks, then again in 2013 for the portfolios of the
four largest banks. Cautious, BlackRock used a false operating name,
Solar, rented modest offices in a residential area of Athens, and gave
its employees armed escort. A final mission was conducted in 2015.
Today, the operator has built a shopping centre for 300 million euros in
Athens. It owns shares in two banks, in the main energy supplier and in
the national lottery, which is in the process of being privatised.
“Nothing indicates that BlackRock employees who came to test our
banks passed on information to other teams,” says an investor in Athens
assured of anonymity. BlackRock would not have risked demolishing its
reputation for so little! But for this investor, the problem goes
“When you climb the hierarchical ladder, you end up reaching a level
where you have access to information from the entire company, consulting
and investment. So, when Larry Fink meets a Greek, Spanish or Irish
head of state, which interest does he choose to address? The audit part
or the investment part? Why not both, at his discretion?
This ambivalence ends up creating waves. In Spain, four of the
largest real estate developers today have BlackRock among their
investors, as do the six largest Spanish banks. But in May 2012, the
state asked the firm to evaluate the bad debts and real estate assets of
its credit institutions and their recapitalisation needs. Spanish
parliamentarians have detected possible conflicts of interest in this
and have pushed the economy minister, Luis de Guindos, now
vice-president of the ECB, to about-turn and opt for the German firm
Roland Berger instead.
The same awkwardness surfaced in the Netherlands, when in December
2012 the central bank asked BlackRock Solutions to analyse the loan
portfolio of the national banking giant ING, then, in July 2013, the
real estate assets of all Dutch banks. At the time BlackRock already
owned more than 5% of ING across some twenty sectors. Questioned by a
Member of Parliament, Finance Minister Jeroen Dijsselbloem, who at the
time was also President of the Eurogroup, justified his actions by
referring to the existence of a Chinese wall between BlackRock’s
advisory and fund management activities.
Ironically, to avoid any conflict of interest itself, the Dutch
central bank had decided in 2007 to entrust the management of the
pension funds of its employees to…BlackRock.
Revolving doors and lobbying
To extend its influence in Europe, BlackRock has surrounded itself by well-known personalities, such as George Osborne, UK Finance Minister from 2010 to 2016 under David Cameron, who is now editor of The Evening Standard newspaper and works one day a week as a consultant at BlackRock. His remuneration matches his fame: 650,000 pounds (739,600 euros) per year.
As he reformed UK pensions in his last two years at his department,
George Osborne met BlackRock executives on five occasions, allowing its
asset managers to access an annual market of 25 billion pounds. Rupert
Harrison, Osborne’s chief of staff, was also hired by the fund. “Given
his experience in implementing the recent pension reform in the UK, he
is uniquely positioned to help us expand our pension offer,” the US firm
said in a statement.
In Germany, it is Friedrich Merz, former head of the CDU in
Parliament, the party of the former CDU leader Angela Merkel, who
currently manages the local operations of the asset manager. In
Switzerland, Philippe Hildebrand, the former head of the Swiss central
bank, was recruited. In Greece, BlackRock has opted for Paschalis
Bouchoris, the former head of a government privatisation programme.
As for France, its president is Jean-François Cirelli, former
economic advisor to Jacques Chirac, then deputy chief of staff for
Jean-Pierre Raffarin. This alumnus of the École Nationale
d’Administration led GDF (Gaz de France) from 2004, steering the group
towards privatisation. Then, during the last presidential election, he
joined Alain Juppé’s campaign committee, as did the current Prime
Minister, Édouard Philippe.
And in Brussels? BlackRock has been installed on the first floor of
35 Place de Meeûs since 2010, in front of a park where European
officials throng in the lunchtime sun during the week. According to the
European Union’s Transparency Register, in 2012 BlackRock claimed to
have spent some 150,000 euros on its Brussels business. In 2014 it was
10 times that.
Between November 2014 and March 2018, the US operator solicited, and
obtained, meetings with members of the European Commission on 33
occasions. According to a source in the European Parliament, BlackRock
also organises “information days” for parliamentary assistants “to
explain how a product works or how passive funds can be used to enhance
economic growth. In the end, these parliamentary assistants will be able
to best advise the members,” she says.
Daniela Gabor, Professor of Macroeconomics at the University of
Western England (UWE) in Bristol, has been following a lot of debates in
Brussels on the regulation of finance since 2013, when the EU’s
Internal Market Commissioner, Michel Barnier, promised to strengthen the
rules of the financial system.
“The British commissioner who took over from Barnier, Jonathan Hill,
wanted the commission to work hand-in-hand with the financiers and every
time a debate or a hearing was organised, BlackRock’s people were
there,” recalls Daniela Gabor.
“Then I realised that it was no longer the banks that had the power
but the asset managers. We are often told that a manager is there to
invest our money for our old age. But it’s much more than that,” she
says. “In my opinion, BlackRock reflects the renunciation of the welfare
state. Its rise in power goes hand-in-hand with ongoing structural
changes; changes in finance, but also in the nature of the social
contract that unites the citizen and the state.”
Daniela Gabor explains that the European Central Bank, which
commissions BlackRock to audit banks, has no power over the company.
“BlackRock’s argument is simple: we do not do leverage, we do not act
like banks, so we do not need to be regulated as a systemic
In fact, BlackRock slips under all radars. “They can be regulated for
reasons known as micro-prudential, to protect their customers, but not
as a financial institution tasked with ensuring overall financial
stability,” she says.
AMF and BlackRock, two fellow travellers
On the French side, BlackRock, like any asset manager, must declare
to the Autorité des Marchés Financiers (AMF) if it crosses certain
thresholds – 5 % and then 10 % – during a takeover of a company listed
on the Paris Stock Exchange. In addition, the AMF checks the commercial
prospectuses of its financial products submitted to potential customers.
And nothing else. A member of the Stock Exchange watchdog body
expresses surprise at our questions about the weakness of controls over
this fund manager. “For its European operations, BlackRock is
headquartered in England. It’s with them that you have to inquire. We
give only one stamp.”
When, for example, BlackRock declares to the AMF that it holds 5.16%
of the Casino Group through two subsidiaries, the financial database of
Thomson One, part of Thomson Reuters Group, has in its records for the
same period a figure of 9.66%, via six different subsidiaries. The same
for Safran, which declared 6.22% at the AMF, less than the 9.03%
indicated by Thomson One.
The French regulator is mute in the face of these discrepancies in
the figures. The same oddities are there with the German regulator
concerning companies like Deutsche Wohnen, Vonovia, Deutsche Post and
Bayer AG. The regulator is promising a “clarification”.
If the AMF does not seem over-attentive towards BlackRock, BlackRock
for its part doesn’t stint in giving out advice. “We invite the AMF to
reduce legal barriers” or “we will be happy to help the AMF to develop a
tailored approach” are some of the propositions featuring in a letter
it sent to the stock market authorities in 2013. The goal is simple:
avoid all regulation.
BlackRock surveys are regularly included in AMF publications. The
monthly newsletter of the Observatoire de l’Épargne provides BlackRock
surveys on the attitudes of French savers:
“Are the French confident enough to invest?” (June 2016), “Do French
women save more than French men?” (April 2016), “Are more French people
planning their holidays than their retirement?” (December 2013).
BlackRock has a response to everything
Last November, the AMF organised a round table at which the president
of BlackRock France was among the speakers. Jean-François Cirelli
highlighted their shared chemistry. “We want national regulators to keep
their feet close to the ground. […] How can we strengthen the idea with
the public authorities, with our customers, that we all must invest for
retirement in the capital markets? How can we take advantage of the
post-Brexit era? The AMF has published a report on [how better] to
invest in equities over the long-term and this travels in that direction
Keeping an eye on potentially favourable reform of French retirement
savings, whose contours were refined by Minister Bruno Le Maire, on the
European front BlackRock can already count on the zeal of Valdis
Dombrovskis. This Latvian is European Commissioner for Financial
Stability but is also one of the commission vice-presidents. He is
behind the pan-European Individual Retirement Savings Product (PEPP), a
new type of retirement savings product scheduled to be launched next
year within the EU and currently undergoing testing by private and
public-sector researchers. The voluntary contribution programme is
called Resaver, and it’s BlackRock that Valdis Dombrovskis has entrusted
with the task of managing participants’ savings.
Conflict of interest
The power of influence over sovereign states acquired by BlackRock in
a few years begs questioning. So too its multiple roles. One issue in
particular raises questions: the “horizontal” power that BlackRock has
built up in certain sectors through its investments in companies –
aeronautics, construction, spirits, small electrical equipment, etc.
Quickly, the company has found itself a shareholder of all the big names
in the same sector.
In chemicals for example, BlackRock dominates on both sides of the
Atlantic with significant holdings – between 5 and 10% – in all major
global chemical groups: Bayer, BASF, DuPont, Monsanto, Linde and the
French companies Arkema and Air Liquide.
These companies, competitors at first glance, find themselves with
the same shareholder who can, at a whim, push for concentration,
specialisation or sale. This situation created no noise until two
economists, José Azar and Martin Schmalz of the University of Michigan,
published a report on common ownership in 2016. According to their
thinking, BlackRock customers would have nothing to gain from the fact
that companies in which the manager was also a shareholder would engage
in bitter fighting. The two researchers looked at the commercial
aviation sector and saw an upward alignment of ticket prices among the
top five US airlines, in which BlackRock and its rival Vanguard have
In Germany, the competition authority has expressed concern. It said:
“There is a significant potential risk of distorting competition
through horizontal shareholdings between companies in the same economic
sector.” In France, the competition authority is kicking the issue
outside the field of play. “We do not have any specific work reflecting
on this issue underway right now,” it said. But on 16 February 2018,
European Competition Commissioner Margrethe Vestager delivered a speech
on the theme and promised to launch a study to measure the scale of
Naturally, BlackRock would prefer to distance itself from such
controversies, presenting instead the image of a company committed to
the well-being of humanity. In a letter sent on 12 January 2018 to the
bosses of the companies of which he is a shareholder, Larry Fink invited
all to work more actively for the common good. His French
representative for one might find this hard.
Jean-François Cirelli is a member of the “comité Action publique
2022”, created by Prime Minister Philippe to reflect on the public
services of tomorrow. When asked about the nature of his contribution,
he defines public service as access to employment and the mechanism of
supplementary pension financing.
“I think about two things. One, what needs to be done so that Pole
emploi (public employment agency) can better respond to employment
trends and better guide the unemployed. And two, should Agirc Arrco
(complementary compulsory pension) contributions be collected by Urssaf
(network of private organisations that collect contributions out of
salaries), which already collects more than 400 billion euros, rather
than letting Agirc Arrco collect them themselves?”
Then he adds: “And I confirm, there is nothing BlackRock in there. By
the way, I purposely took on issues which don’t pose conflicts of
This story is part of our in-depth investigation into the investments and wide-ranging influence of BlackRock.