How the Power Elites exert their influence

Recently I shared with you the enormous concentration of stock ownership and asset management of three giant investment firms: Blackrock, Vanguard, and State Street. These firms are pioneers in innovative new forms of investing called Index Funds and Exchange Traded Funds (ETFs). Not only do these three firms, called the Big Three, own, control, and manage huge blocks of stock, through the enormity of their holdings, their collective voting power, and influence they exert inordinate control over corporate and economic decisions and policy. Their reach and influence are far greater than an individual or smaller investor group.
This poses grave implications for funds, investors, the economy, and politics on both the national and international levels! A 2017 study published by Cambridge University Press entitled Hidden Power of the Big Three? Passive index funds, re-concentration of corporate ownership, and new financial risk by Jan Fichtner, Eelke M. Heemskerk, and Javier Garcia-Bernardo examined the concentration of corporate ownership via stock holdings and asset management that Blackrock, Vanguard, and State Street possess and the sway they hold over the capitalist system. “An original and compressive mapping of block-holdings revealed that in the United States, the market for corporate control shows unprecedented levels of concentrated corporate ownership. The Big Three occupy a position of “structural prominence” in this network of corporate governance. We furthermore found that while the proxy voting strategies of the Big Three show signs of coordination, they by and large support management. However, BlackRock, Vanguard, and State Street may be able to influence management through private engagements. Moreover, management of co-owned companies is well aware that the Big Three are permanently invested in them, which makes it possible that through this ‘disciplinary’ effect they may internalize some common objectives of the passive index managers. On balance, we find significant indications that the Big Three might be able to exert forms of power over the companies held in their portfolios that are hidden from direct inspection.” Hidden Power of the Big Three? Passive index funds, re-concentration of corporate ownership and new financial risk by Jan Fichtner, Eelke M. Heemskerk, and Javier Garcia-Bernardo
So what, what does this mean for us? It means if you are an investor the good news is you can get into the investment game using Passive Index Funds which have cheaper fees and have a greater opportunity for return on investment because they are involved in a broader, more diverse investment strategy.
On the downside, these three firms can and do exert major influence and control over investing and the economy as a whole. Their decisions can influence for example the returns on your mutual fund investments, your pension, or retirement fund bottom lines. This is nothing new the uber-rich have always played a major role in the economy and politics because the US is a plutocracy, a nation ruled by the rich.
But now, a smaller management clique controls the majority of assets. Because their portfolios are so extensive, they have direct access to a wider variety of economic activities: Big Pharma, health care, media, defense contractors, artificial intelligence, and other investment holdings. By virtue of their vast holdings, they maintain powerful yet veiled positions of real power. “One crucial difference between the active fund and the index fund industries is that the former is fragmented, consisting of hundreds of different asset managers, both small and large. The fast-growing index sector, on the other hand, is highly concentrated. It is dominated by just three giant American asset managers: BlackRock, Vanguard, and State Street – what we call the Big Three. Lower fees aside, the rise of index funds has entailed a massive concentration of corporate ownership. Together, BlackRock, Vanguard, and State Street have nearly US $11 trillion in assets under management. That’s more than all sovereign wealth funds combined and over three times the global hedge fund industry…Over the past decade, numerous US industries have become dominated by only a handful of companies, from aviation to banking. The Big Three – seen together – are virtually always the largest shareholder in the few competitors that remain in these sectors… This is the case for American Airlines, Delta, and United Continental, as it is for the banks JPMorgan Chase, Wells Fargo, Bank of America, and Citigroup. All of these corporations are part of the S&P 500, the index in which most people invest. Their CEOs are likely well aware that the Big Three are their firm’s dominant shareholder and would take that into account when making decisions. So, arguably, airlines have less incentive to lower prices because doing so would reduce overall returns for the Big Three, their common owner. In this way, the Big Three may be exerting a kind of emergent ‘structural power’ over much of corporate America.” These three firms own corporate America https://theconversation.com/these-three-firms-own-corporate-america-77072
Vast concentration of wealth in the hands of so few stifles competition leading to monopoly, and in an even more sinister fashion exerts major influence not only on corporate policies but major financial and governmental decisions also. Their influence on society is huge. Please read these articles to glean just how insidious this situation really is: https://childrenshealthdefense.org/defender/blackrock-vanguard-own-big-pharma-media/, https://www.babamail.com/content.aspx?emailid=29883, and https://www.disclose.tv/t/blackrock-the-global-giant-you-likely-never-heard-of/10293.
This is merely the tip of the iceberg. This concentration and consolidation of influence impact us every day in ways we are clearly not aware of. “BlackRock accumulated much of its fortune in the 1990s and early 2000s by playing a key role, along with other financial institutions, in promoting mortgage-backed securities. It was these same toxic securities that poisoned the banking system and resulted in countless housing foreclosures, bankruptcies, and evictions in the 2008 financial crisis and much hardship for the American people. To their disgrace, both Democrats and Republicans then allowed BlackRock to “clean up” this toxic mess by being given authority to hand over trillions of dollars of public funds to chosen banks, hedge funds, and other financial institutions, and, in the process, pocketing millions of dollars. In 2020, once again it seems, history is repeating itself but on an even more massive scale. Private financial interests, not the American people, are deciding what to do with trillions of dollars of public money. Yet, the American people will be liable for any and all the loans that default and any and all junk bonds and risky securities bought. It is interesting to note that, since the 2008 bailouts and the others that followed, BlackRock’s managed assets skyrocketed from $1.3 trillion to $7.4 trillion today while the net worth of the majority of Americans either stagnated or fell.”
Foxes in the henhouse, who decides where bailout money goes? Peter Ewart https://pgdailynews.ca/index.php/2020/04/14/opinion-foxes-in-the-henhouse-who-decides-where-bailout-money-goes/ (underline emphasis is mine.)
Given what we know of the excesses of power, greed, and avarice this doesn’t bode well for us.