BlackRock Lobbies to Avoid Supervision on Systemic Risk, Report Says

BlackRock Inc. executives met with Federal Reserve officials this month to explain why the world’s largest money manager doesn’t pose enough risk to the financial system to merit central bank supervision.

Bloomberg reports Wednesday that Robert Connolly, BlackRock’s general counsel, and vice chairman Barbara Novick, head lobbyist and one of the New York-based firm’s co-founders, met Nov. 4 with seven Fed officials to discuss the newly formed Financial Stability Oversight Council's authority to designate a firm “systemically important” and liable to tougher oversight, according to a posting on the Fed’s website.

Bloomberg says the oversight council, created by the Dodd-Frank financial overhaul law passed in response to the global economic crisis of 2008, can recommend that the Fed strengthen rules to reduce risk at banks and other financial companies. The group will decide next year which, if any, money managers, mutual funds, hedge funds, private-equity firms, insurers and other companies deserve more monitoring because they pose a potential risk to financial stability.

Connolly and Novick told Fed officials that “unlike a bank, an asset-management company acts as an agent for its clients and does not hold investment assets on its own balance sheet,” according to the Fed website. “They also noted that clients can and do replace asset managers, with minimal switching costs, which could reduce the systemic-risk consequences arising from an asset manager falling into financial distress.”