Laurence Fink, who helped create the market for mortgage-backed securities, said the credit losses that had cost banks and securities firms $45 billion were about to get worse.
Fink, chief executive of New York-based fund manager BlackRock Inc., said Tuesday at an investor conference that "many institutions don't understand what the credit crunch is going to do to earnings and their balance sheet."
Financial stocks rallied Tuesday after Goldman Sachs Group Inc. CEO Lloyd Blankfein told the same conference, sponsored by Merrill Lynch & Co., that his firm didn't plan to take any significant write-downs on mortgage-related assets. But Fink said the crisis wasn't over.
"I don't know when it's over, but it's not over yet," Fink said. "The bottom has not been achieved yet."
In fact, BlackRock, the largest U.S. publicly traded asset manager, intends to raise "multibillion dollars" to invest in securities whose value has tumbled in the wake of the sub-prime mortgage meltdown, Fink said. He declined to elaborate.
Blankfein was similarly bearish, saying Goldman Sachs was still betting that the value of mortgage-backed securities would continue to fall.
Fink, considered a leading candidate to succeed ousted Merrill Lynch CEO Stan O'Neal, said BlackRock had had a succession plan in place for at least two years. He did not say whether he had been offered the Merrill Lynch position.
BlackRock, which Fink founded in 1988, acquired Merrill Lynch's fund unit last year in a deal valued at $9.4 billion.
BlackRock shares rose $6.70, or 3.6%, to $195.67.