The Fed reportedly asks BlackRock to buy billions in bonds as part of its coronavirus relief effort

GettyImages / Eugene Gologursky

BlackRock CEO Larry Fink

• The Federal Reserve tapped BlackRock Tuesday afternoon to cooperate with billions in bond purchases for the central bank's coronavirus relief efforts, The Wall Street Journal reported.
• The world's largest money manager will buy agency commercial mortgage-backed securities approved by the Fed and on behalf of the central bank's New York branch.
• BlackRock will also lead two credit facilities for the Fed: one for new corporate debt and another for existing corporate bonds.
• The programs are part of the Fed's latest policy move to pad markets from the coronavirus's economic effects.
• Visit the Business Insider homepage for more stories.

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The Federal Reserve asked BlackRock on Tuesday to purchase tens of billions of dollars in bonds in accordance with the central bank's economic stimulus efforts, The Wall Street Journal reported.

The world's largest money manager will buy agency commercial mortgage-backed securities approved by the Fed and on behalf of the central bank's New York branch, according to The Journal.

BlackRock will also lead two purchase facilities for the Fed. One pool will buy new, investment-grade corporate debt, while the other will focus on existing corporate bonds.

The latter program will primarily focus on bonds, but BlackRock will also be able to turn cash toward investment-grade bond exchange-traded funds. BlackRock will be able to buy funds of its own through the Fed partnership, though the manager won't be able to invest more than 20% in any ETF, The Journal reported.

Coordination with the Fed on economic relief efforts isn't new for the Wall Street giant. BlackRock supervised assets previously owned by AIG and Bear Stearns after the firms went under in the 2008 financial crisis.

Read more: Morgan Stanley studied decades of recession history to compile a playbook for what to buy during and after a stock bear market - and when to do it

The purchase programs are part of the Federal Reserve's policy salvo announced Monday. The central bank lifted the cap on its Treasury and mortgage-backed security purchases and will begin buying corporate bonds to aid firms hit by the coronavirus's economic effects. New credit facilities for large employers, consumers, and businesses will further ease cash stresses as the economy slows at unprecedented levels.

"Aggressive efforts must be taken across the public and private sectors to limit the losses to jobs and incomes and to promote a swift recovery once the disruptions abate," the central bank said in a statement.

The Treasury Department will initially invest $10 billion in each of the two facilities, according to term sheets published by the Fed.

BlackRock will coordinate with the central bank's financial markets advisory arm and not its asset-management business, The Journal reported. The money manager stands to face strict scrutiny over its asset purchases as the Fed aims to avoid conflicts of interest.

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