Washington must depoliticize the market and turn 'passive-aggressive' holders like BlackRock back into the passive investors they claim to be.
Are Wall Street giant BlackRock and CEO Larry Fink dodging President Trump’s campaign to rein in “woke capital”? Surprising new reports this week suggest a BlackRock executive has snuck onto the shortlist to be nominated the next Fed chairman. Last month, a presidential executive order on the politicization of finance left BlackRock’s bullying untouched. And for months, the press has covered Fink’s various attempts to charm the White House.
The administration should not be fooled. Despite a recent hasty attempt at a political rebrand, for years, BlackRock stood out as the loudest, proudest, and most aggressive example of Wall Street weaponizing the American people’s money as a method to push a progressive agenda from outside the democratic process. President Trump and his Securities and Exchange Commission (SEC) must resist the charm offensive, hold BlackRock accountable, and not leave their battle against “woke capital” half-finished.
BlackRock and fellow financial giants State Street and Vanguard dominate the market for low-cost index funds and “passive” investments. As American investors have flocked to these popular options, these titans have accumulated a significant amount of control over our private sector. Today, they control approximately a quarter of the entire S&P 500 between them. More than 80 percent of S&P 500 companies have one of the three as their largest shareholder. And while BlackRock and the others claim their investment strategies are passive and neutral, they have, to varying degrees and at varying times, used their clout for political activism, pushing an “environmental, social, and governance” (ESG) agenda on some of the companies in which they are invested.
No American elected BlackRock to govern us. The Senate never confirmed Larry Fink to a cabinet post. But BlackRock and Fink have used the trillions they “passively” manage to shove companies toward ideological agendas hard to reconcile with boosting investor return. Fink bragged in 2017, “You have to force behaviors, and at BlackRock we are forcing behaviors.” Even when attempted “forcing” of left-wing agendas on companies failed to pass muster at the ballot box, BlackRock was able to use voters’ own savings to help it along anyway. They treated millions of Americans’ hard-earned dollars as their political battering rams.
As a former member of Congress who has served on the boards of publicly traded American companies, I have watched this dynamic play out from both the policymaker’s seat and the private sector.
In 2020, BlackRock used its stake in ExxonMobil to help pass a resolution that pressured the company to play by the rules of the Paris climate accord even after President Trump had pulled the U.S. out of it. In 2021, it tried to force a “racial justice audit” on Johnson & Johnson. When it came time for J&J shareholders to vote, only one third ended up joining BlackRock’s push, showing just how far from the mainstream the firm had drifted. In 2020, Fink stated that demographic discrimination and racial quotas would guide BlackRock’s own hiring, promotions, and business relationships.
America has the world’s best capital markets because they are a two-way street between business leaders and traditional active investors who do their homework and form convictions about companies. But the whole sales pitch of the “passive” funds is that they make no such judgments and simply mirror the market. They can’t have it both ways. These firms can’t pretend they are meek spectators while simultaneously bragging that they have been trying to make the world’s biggest companies submit to an ideologically driven agenda.
When I wanted to advance ideas for strengthening our economy, I ran for office, earned my neighbors’ trust, and served in the House. If my constituents didn’t like my ideas, they could vote me out. Our democracy depends on this feedback loop. It is deeply unhealthy to let a tiny group of financiers act as shadow regulators that nobody can hold accountable.
As President Trump and SEC Chairman Paul Atkins have begun to act against the improper politicization of Wall Street, BlackRock has rushed to cover its tracks. The firm has temporarily dialed back its support for left-wing shareholder proposals. But nobody truly believes that Fink and his colleagues have become political moderates overnight. Whenever their preferred side takes back Washington, woke capital’s true colors will reemerge. The political weathervaning only underscores why everybody will benefit — left, right, and center — if the SEC nudges Wall Street back toward its day job and away from clumsy moonlighting in politics.
The business of business should be business — and the SEC has a window in which to act. It should encourage BlackRock and the other passive giants to leave policy to policymakers and refocus on serving their customers. American savers deserve markets geared solely toward financial return, and American citizens deserve for policy decisions to be made by our elected representatives.
Our nation is at the start of an exciting new era of innovation and investment. Low-cost index funds should help millions of Americans reap the benefits. To ensure this, Washington must depoliticize the market and turn “passive-aggressive” holders like BlackRock back into the passive investors they claim to be.