Bloomberg reports that at a Merrill Lynch sponsored investor event, both BlackRock CEO Larry Fink and Goldman CEO Lloyd Blankfein gave negative readings for the credit market, particularly CDOs and subprimes. Goldman is putting its money where its mouth is and is short mortgage-related debt.
BlackRock also said it was in contact with the Treasury about forming a vulture fund for distressed debt.
Laurence Fink, who helped create the market for mortgage-backed securities, said the credit losses that have already cost banks and securities firms $45 billion are about to get worse.
Fink, chief executive officer of New York-based fund manager BlackRock Inc., said today at an investor conference that “many institutions don’t understand what the credit crunch is going to do to earnings and their balance sheet.” At the same conference, Goldman Sachs Group Inc., CEO Lloyd Blankfein said his firm is continuing to bet that mortgage-backed securities and collateralized debt obligations will fall……
Blankfein said Goldman, the world’s most profitable investment bank, doesn’t plan to take any significant writedowns on mortgage-related assets. Goldman shares rose 8.5 percent to $233.04 at 4 p.m. in New York Stock Exchange composite trading, and other financial stocks also climbed.
“We continue to be net short in these markets,” Blankfein, 53, said in response to a question about the New York-based firm’s position.”…..
“I don’t know when it’s over, but it’s not over yet,” Fink, 55, said. “The bottom has not been achieved yet.”….
BlackRock, the largest U.S. publicly traded asset manager, has been in contact with the Treasury, Fink said. BlackRock will raise “multibillion dollars” to invest in distressed securities that are resulting from the “chaos” in the market, Fink said, while declining to elaborate on fund details