Goldman Sachs : BlackRock Emerges as Wall Street Player in Biden Administration

By Dawn Lim and Gregory Zuckerman

Wall Street bankers, and in particular those from Goldman Sachs Group Inc., have long held senior positions in the White House. Under President-elect Joe Biden, such roles are going to executives of BlackRock Inc.

A former Goldman executive held the Treasury secretary post in three of the last four administrations, but the firm is absent so far from the White House this time. Instead, two executives who have worked at asset-management giant BlackRock will be the senior Wall Street representatives.

Mr. Biden is expected this week to name BlackRock's head of sustainable investing, Brian Deese, to run the National Economic Council, said people familiar with the matter. Adewale "Wally" Adeyemo, a former chief of staff to BlackRock's chief executive, is expected to be named Tuesday as the No. 2 at the Treasury Department.

"By picking folks with deep ties to large asset managers, the administration can help assuage financial executives' concerns. It sends a clear signal to the industry to breathe easier: They can plan for stability without likely facing massive new regulatory or tax risks," said Tyler Gellasch, executive director of investor trade group Healthy Markets Association.

Some progressives and investor advocates worry that the naming of any finance executives could result in looser regulatory scrutiny on big money managers.

But broadly, BlackRock may not draw the kind of anger that traditional Wall Street banks like Goldman tend to generate. BlackRock is in the business of investing money for individuals and institutions like endowments, and much of its growth comes from funds that track market indexes.

Asset managers like BlackRock don't arrange mergers and acquisitions, they don't earn big profits from trading and their employees, while well paid, often aren't seen within the finance industry as swaggering bankers. The firm has faced criticism for investing in companies that contribute to climate change, and for failing to live up to its own rhetoric on the subject, environmental activists say. It pledged this year to take a tougher stance.

The role of BlackRock alumni in the Biden administration is the latest chapter in a decadelong rise in both Washington and on Wall Street. BlackRock is the largest asset manager in the world with $7.8 trillion under management as of September. As it has grown, it has both boosted its operations in Washington and hired government officials. Messrs. Deese and Adeyemo worked in the Obama administration.

BlackRock's global footprint and experience with markets "will be invaluable as the president-elect navigates a slowing economy and turbulent markets in the wake of the pandemic," said Stefan Selig, an investment banker who runs BridgePark Advisors LLC and was undersecretary of Commerce during the Obama administration.

The Biden administration economic team will be filled with economists and policy makers who focus on areas such as income inequality and labor markets. That is a contrast to the Trump administration, which named former Goldman Sachs executive Steven Mnuchin as Treasury secretary, former Goldman President Gary Cohn as an economic adviser and other firm alumni to senior roles. Goldman veteran Robert Rubin served as President Bill Clinton's Treasury secretary, while Henry Paulson Jr. occupied the position in President George W. Bush's second term. The Obama administration had few Wall Street executives.

Mr. Adeyemo, a former senior international economic adviser during the Obama administration, is expected to serve as Janet Yellen's top deputy at the Treasury Department. The former BlackRock executive worked as a senior adviser for the company from 2017 to 2019, including as interim chief of staff to BlackRock CEO Larry Fink.

Mr. Fink was on the shortlist to be Treasury secretary on Hillary Clinton's cabinet, said people familiar with the matter. He has told board members and senior executives this year that he wasn't going to Washington and was committed to staying at the firm for years.

Mr. Deese was a key member of the White House Task Force overseeing the bailout of General Motors Corp. and Chrysler LLC in 2009 and advised the government in negotiating the 2015 Paris climate accord.

He joined BlackRock in 2017 and focused on integrating environmental and social considerations into how BlackRock invests. That role got a boost after Mr. Fink announced measures in early 2020 aimed to "place sustainability at the center of our investment approach." That included taking a harder line against companies that aren't disclosing climate risks and paring back some coal exposure.

BlackRock expanded its sustainable business over the first three quarters of 2020, growing assets in such strategies by some 40% to $151 billion.

Tom Donilon, chairman of BlackRock think tank arm BlackRock Investment Institute -- and brother of Mr. Biden's chief political strategist on the campaign trail, Mike Donilon -- had been in the running for the position as Central Intelligence Agency director, people familiar with the matter said. But the BlackRock executive recently said he wanted to stay in the private sector, according to other people familiar with the matter.

BlackRock has drawn scrutiny for its role in advising the Federal Reserve on purchases of exchange-traded funds and bonds to support credit markets as part of the central bank's emergency measures to calm markets. The firm has said it would seek to avoid potential conflicts of interest between its fund investing and the bond buying it is doing for the Fed.

Its investment reach has made it a target from activists and academics who raise questions about whether its funds could destabilize markets and whether it has done enough as a shareholder to push for better behavior from companies on environmental and social issues.

"Any BlackRock executives that move into the Biden administration need to prove that they are willing to take bold, proactive action to stop climate change and protect the communities most impacted by the crisis," said Moira Birss, climate and finance director at Amazon Watch.

But the picks reflect Mr. Biden's pragmatism during an unprecedented health crisis, others say. "This crisis is unlike any we've seen since the Great Depression, so it's unsurprising that President-elect Biden is seeking people with experience in both government and markets to lead the recovery," said Milan Dalal, managing partner at Tiger Hill Partners, a government relations advisory firm.

Sabrina Siddiqui contributed to this article.

Write to Dawn Lim at [e-mail] and Gregory Zuckerman at [e-mail]

(END) Dow Jones Newswires

12-01-20 1201ET