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FDIC Taps BlackRock To Sell $114B In Securities From Failed Banks

BlackRock's Manhattan headquarters building

The Federal Deposit Insurance Corp. picked money management firm BlackRock Financial Market Advisory to conduct portfolio sales of securities previously owned by the failed Signature Bank and Silicon Valley Bank.

The securities have a face value of $114B, with Signature holding $27B and SVB holding $87B. They are mainly agency mortgage backed securities, collateralized mortgage obligations and commercial mortgage-backed securities.

The FDIC is acting as receiver for the former banks, both of which imploded in March after panicky runs by depositors, representing some of the largest bank failures in U.S. history. The FDIC soon agreed to make whole any depositor, even above the legal limit of $250K in deposits that the agency insures.

The agency sought to allay fears about the impact of such a sale, stating that the sales would be “gradual and orderly, and will aim to minimize the potential for any adverse impact on market functioning by taking into account daily liquidity and trading conditions.”

BlackRock has handled the sale of large amounts of debt before. During the aftermath of the Great Financial Crisis, the Federal Reserve and the U.S. Department of the Treasury picked the company to oversee the sale of $130B in debt formerly held by investment bank Bear Stearns Cos. and American International Group.

First Citizens BancShares agreed to buy most of SVB late in March, including its deposits and $72B in loans that it holds, but not the securities that BlackRock will now handle.

Signature, whose failure quickly followed that of SVB, had its deposits and some of its loans snapped up by Community Bancorp’s Flagstar Bank. The FDIC is also planning to hire real estate services giant Newmark to sell about $60B in loans that Signature Bank had on its books.