Sunday, June 21, 2009

Treasury’s Got Bill Gross on Speed Dial

Appearing on TV and bending the ear of the White House, Bill Gross of Pimco has emerged as one of the nation's most influential financiers.

Months ago, before the election, he wrote an open letter to then-candidate Obama (whom he predicted would become president, proving his prescience and instinct yet again), outlining what he saw as the right course to take in tackling the job of fixing the national economy. [See especially post of 1 July2008, and others, including one of 20 January 2009]
Every day, Bill Gross, the world’s most successful bond fund manager, withdraws into a conference room at lunchtime with his lieutenants to discuss his firm’s investments. The blinds are drawn to keep out the sunshine, and he forbids any fiddling with BlackBerrys or cellphones. He wants everyone disconnected from the outside world and focused on what matters most to him: mining riches for his clients at Pimco, the swiftly growing money management firm.

How I wish I had that power, even if for a few minutes, to have people shut off their electronic devices and rely on their own brain.

Such nationalization [as advocated by Nouriel Roubini and Paul Krugman, to temporarily nationalize zombie banks], Mr. Gross insists, would be an unmitigated disaster. “There are two grand plans,” he said this spring at a meeting of his firm’s investment committee. “One is the Krugman-Roubini plan. They think the banks have so much garbage they are beyond hope. The other side is the administration’s side. That’s the one we’re on. If the other side should ever gain credence, then we’ll have something to worry about.”

Timothy F. Geithner, the treasury secretary, wants investors like Pimco to work with the government to buy some bank debt.

Mr. Gross is hardly a disinterested observer. Pimco, owned by the German insurer Allianz, is jockeying to be picked by Mr. Geithner to relieve the likes of Bank of America, Citigroup and other banks of an estimated $1 trillion in soured mortgage debt so they can start lending freely again. Mr. Gross calls the plan a “win-win-win” for the banks, taxpayers and Pimco investors.

Disinterested observer, if they exist, woul dnot understand things as well as Bill Gross --and, just what the heck IS a disinterested observer?
The government is planning to announce soon which money managers will participate. A spokesman for the Treasury Department would not say whether Pimco would be one of them.

Well, I'd put a few bucks on Bill gross being chosen.
IN many ways, it is perfectly logical for the White House to turn to someone like Mr. Gross at such a time. Few investors understand the mortgage market better. As co-chief investment officer, he personally manages Pimco’s flagship, the Total Return fund, which has $158 billion in assets. As of the end of May, he had invested 61 percent of the fund’s money in mortgage bonds.

61% of 158 billion is more than 90 billion bucks ($96.38, in fact); a lot of money, anyway it's counted.

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