A very good read. Maybe the most important article to read this week.
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With more than $23 trillion in assets under their collective management, the Big Three investment managers BlackRock, Vanguard and State Street are undisputed financial heavyweights. State Street has more assets under management than the entire annual gross domestic product of Germany. And together, they've become known for imposing a woke political agenda on corporate America.
The Big Three have heavily invested in America's banks. At some of them, BlackRock and Vanguard hold more than 10% of the voting stock. State Street also holds substantial amounts of shares of many banks. That's important because, under the Change in Bank Control Act, companies are prohibited from acquiring "control" of a bank unless certain federal regulators approve beforehand. Federal regulators long ago adopted regulations that rebuttably presume "control" when a firm holds more than 10% of the voting stock of a publicly held company.
Jonathan McKernan, a Republican on the FDIC's board of directors, recently called for enhanced monitoring of the Big Three, and for temporarily prohibiting further investments by the investment manager behemoths in FDIC-regulated banks in excess of 10%. Democrat board member Rohit Chopra appears to be on board as well.
The bipartisan duo has it right. These investment managers have used voting power that they should have never been permitted to wield. Instead of using it solely for the benefit of their customers, they anointed themselves rogue, unaccountable emperors whose woke whims at banks could include choking off credit and denying banking services to businesses they politically disfavor, including oil companies, firearms manufacturers, payday lenders and other businesses not to their personal liking. The corrupting influence of their undeserved power should and can at long last be curbed in the case of banks.
The FDIC was weaponized during the Obama administration's "Operation Choke Point" to actively discourage banks from serving clients with business classifications at ideological odds with the White House. After the operation's discovery, it collapsed under the weight of legal action. But today, the acquisition of controlling blocks of bank stock by proudly woke investment managers raises the specter of a return to Operation Choke Point by different means.
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