Those Valley Boys
For those who may not know, Laurence “Larry” Fink is the CEO of BlackRock which is one of the most successful and most powerful investment management complexes in the world. Early in the last decade, BlackRock’s reputation and stature were substantially enhanced by the firm’s timely strategic shift reducing its exposure to collateralized mortgage obligations (CMO’s) and other debt based derivative instruments. The reduction in exposure and subsequent “shorting” of these debt instruments by BlackRock came just before the housing market faltered which caused the mortgage bubble burst. As the mortgage bubble deflated and the related financial crises unfolded Larry Fink and BlackRock prospered greatly from the strategic shift. Subsequently, both Mr. Fink and BlackRock have become significantly involved in the management of many of the U.S. Government’s initiatives designed to prevent further economic erosion and directed toward the stabilization of the markets. Several months ago I read Charles Gasparino’s recent book titled, Sellout: How Three Generations of Wall Street Greed and Mismanagement Destroyed the Global Financial System. In the book Mr. Gasparino describes the beginnings of the CMO market and
the history of the development of mortgage derivatives. Mr. Gasparino identifies Laurence Fink as one of two of the earliest developers, innovators, and traders in CMO’s and other debt obligation derivative products. Mr. Gasparino mentions that Larry Fink received an MBA from UCLA’s Anderson Graduate School of Business, and grew up in the Los Angeles suburb of Van Nuys, California. My familiarity with Van Nuys and “The Valley” made me wonder a bit about Mr. Fink’s roots in “The Valley”. So I began doing some research on Mr. Fink’s ‘roots’. I came across what I found to be a very interesting set of connections and coincidences. From Fortune Magazine, Inside the Trillionaires’ Club of BlackRock - August 17, 2009 by Shawn Tully In late 2006 the company developed a model that put a lower, more realistic number on the incomes subprime borrowers were claiming on their "no doc" loans. The projections were shocking: BlackRock figured that when the loans reset to their new, higher rates in a couple of years, most borrowers would be spending more than half their real incomes on mortgage payments. Foreseeing an avalanche of defaults, BlackRock dumped subprime bonds in early 2007 when the prices were still lofty.
Then I found an interesting article, published in the Orange County Register titled, Former Countrywide No. 2 Sees Opportunities in Troubled Mortgages - June 10, 2008 the launch of the Private by Matthew Padilla. In the article there is an interview about the National Mortgage Acceptance Corporation (PennyMac) with PennyMac’s Founder Stanford L. Kurland: Kurland: Q. How did this venture come about? A. I was somewhat in a state of retirement. I left Countrywide in 2006 after after 27 years. From the sidelines, I was watching the mortgage market meltdown and was in communication with associates of mine over what it was going to take to improve or revitalize the mortgage market. Wall Street firms were reaching out to me on whether I had an interest in participating with them. I got a call from the chairman of BlackRock, Laurence Fink, who asked if I would meet a group of executives who were talking about how to address issues in the mortgage market, and they were working with another company (Highfields Capital Management). I was very receptive to talking to Larry Fink. We had grown up together and have been friends since grade school days. Q. Where did you and Mr. Fink grow up? A. We grew up in Van Nuys. That’s the the valley. Other information I discovered about Mr. Stanford L. Kurland: In September 2006, Kurland abruptly retired as President of Countrywide Financial. Immediately prior to his resignation from Countrywide, Kurland was widely anticipated to be the Countrywide CEO, Angelo Mozilo’s, hand-picked successor. Other information on Mr. Kurland Kurland indicates that he graduated from California State University at Northridge, is a Certified Public Accountant, and before progressing through a series of executive jobs at Countrywide was employed by the public accounting firm Grant Thornton: For more on Stanford L. Kurland see 3/5/09 Huffington Post article by Leo Gerard titled, Creep of The Week: PennyMac’s Stanford L. Kurland and The First Post article, Americas article, Americas Most Hated: He Made Billions Billions from Sub-prime, Now Now He’s Making Even Even More From The Crises He Caused by Charles Laurence
Those Valley Boys by Bill George 2/1/2010
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Note: see, Timeline of The United States Housing Bubble: Bubble :
February: The Office of Thrift Supervision implemented new rules that allowed savings and loans with over $1 billion in assets to meet their Community Reinvestment Act obligations without investing in local communities, cutting availability of subprime loans. September: The FDIC FDIC,, Federal Reserve, and the Office of the Controller of the Currency allow loosening of Community Reinvestment Act requirements for "small" banks, further cutting subprime loans. loans.[38] [38][[15] Fall 2005: Booming housing market halts abruptly; from the fourth quarter of 2005 to the first quarter of 2006, median prices nationwide dropped of 3.3 percent.[39] percent.[39] 2005–ongoing: United States housing market correction ("bubble bursting").
Those Valley Boys by Bill George 2/1/2010
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