On completion of its acquisition of Barclays Global, BlackRock will become the biggest fund manager in the world. It will have nearly $2.8 trillion in assets under management. In other words, those guys will be managing the equivalent of more than half the entire BRIC market cap – all by themselves! But, BlackRock may not be able to stay at the top for long.

Ben Bernanke & Co, at the US Federal Reserve, may fight back to reclaim that position. As of now the Fed is the world’s biggest asset manager, with more than $2 trillion worth of stuff on its balance sheet.

The way treasury yields are rising, the Fed may have to expand its buying spree beyond the stated target of $300 billion, despite its reluctance voiced this week to do so. If it doesn’t, the US housing market may slip again on rising interest rates and Obama will find it difficult to raise enough cash through new treasury sales to spend his way to glory.

 If current market conditions persist, Bernanke needn’t have too many worries. His fund managers at the Fed earned $2.7 billion in net profits during the Jan-March quarter alone. That is after making a provision of $5.2 billion for mark-to-market losses on the toxic assets the Fed had to offload from Bear Stearns and AIG.

 It seems the accountants at the Fed were not told about the relaxation in mark-to-market accounting rules, which helped many big US banks to report healthy profits in the first quarter. It is likely that at least some part of the $5.2 billion will be reversed and Fed’s profits will increase even further.

But, Ben Bernanke also knows that he is riding a tiger. It is far more difficult to climb down; you can get seriously mauled or even killed. As the US economy starts expanding, the Fed will have to unwind most of its unconventional market interventions like purchase of treasury securities, commercial paper and other assets.

Even if spread over a fairly long period, it is not easy to liquidate several trillion dollars worth of assets. And Bernanke has to find a way to do so without seriously hurting the market. Talk about riding a double headed tiger!