Shocker: Media Let Wall Street Chieftain Praise His Own Idea
In today's flurry of positive press about the stock market's 7% uptick in response to Treasury Secretary Tim Geithner's bank rescue plan, one name stands out: Bill Gross, chairman of the vast PIMCO bond fund.
Bloomberg, Time magazine, the Financial Times, and other outlets all picked up Gross' punchy declaration that the Geithner plan is "win-win-win." Reuters even touted as an "exclusive" its report that Pimco would be participating in Geithner's public-private initiative to buy up toxic mortgage-backed assets.
There's only one problem with this: Gross is practically duty-bound to love the plan, since it was partly his idea. As the WaPo reported on Sunday: (emphasis mine)
Last fall, billionaire investor Warren E. Buffett, Goldman Sachs chief executive Lloyd Blankfein and William H. Gross, the managing director of PIMCO, the largest bond fund in the world, approached Treasury officials about an idea to create investment funds, using public and private money, to buy toxic assets from banks, according to former senior Treasury officials. Buffett is a director of The Washington Post Co.The Obama administration further developed that proposal to address the two main problems banks are facing: troubled debt such as mortgages that institutions are holding until the loans are paid off, plus the complex securities and derivatives that were invented to finance those loans.
Why is Gross allowed to be quoted waxing rhapsodic about the Geithner public-private partnership, without any added context to illuminate his role in the plan's development? One possible answer: it's no longer considered newsy that the Treasury is openly craving Wall Street's approval of its moves. Josh posted on this truism last night.
Late Update: Some commenters suggest that I'm unfairly maligning Gross, who offered to manage the government's bailout for free and delivered cogent early warnings last year on the growing risk of mortgage-backed securities.
Let me be clear: Gross' praise for the plan he helped develop is all well and good. It would just be nice if mainstream outlets provided context to help understand the central role that Gross, Goldman CEO Lloyd Blankfein, and other investment chiefs are playing in Geithner's plan.
Not to mention that Gross' prescience on the crash last year pushed him to buy up massive amounts of mortgage-backed bonds ... basically betting that his purchases would be backstopped by taxpayers.
Josh
Elana
Matt
Eric
Obama not exactly a profile in courage as he follows Wall St's lead, or maybe Obama does believe the MOTU (Masters Of The Universe) are our only recourse.
March 24, 2009 9:35 AM | Reply | Permalink
BTW, I just noticed what Goldman Sachs wants to do with some of the $12.9 billion (at least) funneled to it through the AIG bailout: buy up part of Barclay's. Link:
http://www.reuters.com/article/newsOne/idUSTRE52M7QM20090324
Uh, isn't this sort of like money laundering? Taxpayer money washes through AIG and into the coffers of Goldman Sachs, which otherwise likely would be technically bankrupt. Goldman Sachs then spiffies up its balance sheet and goes out to gobble up new financial sector acquisitions.
What, again, does this game being played by Summers, Geithner, and Bernanke (Larry, Timmeh, and Ben--the Three Stooges of Wall Street) have to do with reversing the collapse of the real economy that produces goods and provides services?
What does this bailout/money laundering/balance sheet propping/acquisition enabling bailout effort have to do with unfreezing the credit required by the real economy of goods and services?
March 24, 2009 9:59 AM | Reply | Permalink
When the creeps couldn't get the Social Security money, they turned to Plan B. This is Plan B.
March 24, 2009 4:10 PM | Reply | Permalink
This is a little unfair. Back in the Fall, Bill Gross offered to help the government sort out the toxic waste -- and he said he would come in and do it for absolutely free. In addition, he promised to bring other financial people aboard with the requisite know how to help the government try and figure out pricing -- all of them to do it for free as well.
He wasn't in it for profit and his impulse was quite altruistic. If you remember (or perhaps you don't, your background knowledge seems more than a little sketchy, Elana), Paulson hadn't a clue what to do after his idea to buy the toxic assets off the banks' books.
I know that our financial masters of the universe are easy targets these days but a cheap shot is a cheap shot and should be called such. Bill Gross is also one of the saviest fund managers around. You'd be lucky to have been in his Harbor Fund over the past couple of years. You would've lost almost no money, and this is principally because the guy does feel a responsibility to his investors -- including the pipsqueaks who can't wedge themselves into Pimco's institutional funds. Which is not to say Gross is a saint. Who is? You can do much worse.
And by the way, Gross -- no different from he who walks on water Paul Krugman -- saw the dangers in mortgage backed securities quite early on.
So get a grip here. People don't put their money under their mattresses and hope it will grow. They put it in funds and 401k's and you should be
be thankful there are a few Bill Gross's around. This lumping everyone who's ever had anything to do with a financial company all together as criminals an co-conspirators is really getting to be old. You want to be a journalist and help this country out of its informational black hole? Learn to tell two sides to the story.
March 24, 2009 10:40 AM | Reply | Permalink
Interesting article from September 5th 2008, where Gross was asking for Treasury intervention to prevent a financial "tsunami":
http://www.fool.com/investing/dividends-income/2008/09/05/bill-gross-to-treasury-please-help.aspx?terms=Bill+Gross&vstest=search_042607_linkdefault
March 24, 2009 10:52 AM | Reply | Permalink
On September 5, 2008 Gross calls for "government intervention." See, above.
At the time PIMCO was loaded up with GSE debt and watching its price fall.
On September 7, 2008 Treasury devised a "Preferred Stock Purchase Agreements to effectively guarantee the GSEs' obligations."
PIMCO made $1.7 billion on the following day. Nice to have friends in high places.
So much for patriotic, disinterested Bill Gross.
March 24, 2009 2:27 PM | Reply | Permalink
Huh? I posted the link above from Sept 5. Did you read it? Everything he warned about came true.
March 24, 2009 3:02 PM | Reply | Permalink
Yup.
Gross "warned" that if PIMCO didn't get some "government intervention," it would be in deep doodoo. And he got it, two days later -- and made $1.7 billion for his efforts.
March 24, 2009 3:06 PM | Reply | Permalink
Um, this Sept 5th article is 1) not written by him and 2) not on the same date as his letter to investors and 3) the letter was to investors, not the treasury.
Allegations sans evidence sure are fun. Instead of strangely pointing me to an article I posted where he warned correctly about the coming disaster, maybe you have another one which substantiates the connections you are alleging.
How right he was.March 24, 2009 3:18 PM | Reply | Permalink
Your wasting your breath with the Krugman/Stiglitz Dittoheads. Fairness has nothing to do with it. They need their pound of flesh and Obama/Geithner is where they want it from.
These people are the new nihilists: Wall Street Bad, Obama Bad, Geithner Bad. Nationalize Good.
March 24, 2009 11:48 AM | Reply | Permalink
God forbid we should listen to what two Nobel Prize-winning economists have to say. What the hell do they know about anything, anyway? If only Uncle Miltie Friedman was still around, so he could tell us what to do.
Wait, I know - let's ask Greenspan what we should do. Oh, that's right - he thinks we should nationalize the banks, that apostate. Forget him.
March 24, 2009 1:06 PM | Reply | Permalink
Bill Gross is listed on Investopedia as one of the greatest investors:
http://www.investopedia.com/university/greatest/billgross.asp
Sort of like the Warren Buffet of bonds. You might have added some context about who this guy is. And if Warren Buffet approved, I'm not sure you would dismiss it.
Alternatively we could make plans that Wall Steeet hates and snubs, and that are crafted by people entirely ignorant of finance. That might be fun. Sort of a Joe the Plumber style solution.
March 24, 2009 10:45 AM | Reply | Permalink
Yeah, 'cause it's not like anyone on Wall Street had anything to do with the crisis. Who better to fix things than those who know the most about how things got broken in the first place, right?
March 24, 2009 1:10 PM | Reply | Permalink
You're right. We're better off with some Joe the Plumber type regular guy. Let's leave the experts out of this.
Also, academics always succeed in real world situations. That's the lesson from various academics who step into public policy. Robert Macnamara and Condi Rice, for example.
March 24, 2009 3:22 PM | Reply | Permalink
Always the false choice between "Joe the Plumber" and the "experts" that you prefer (i.e., the greedy bastards that created the mess we're in and their enablers in government). I have a feeling that not-Joe the not-plumber would be OK with any plan that let the rich get richer, as long as it was Limbaugh-approved (and, of course, not put forward by a Democratic administration, which is why the dittoheads in congress arte tying themsleves into knots trying to appear populist while at the same time sucking up to their corporatist masters).
March 24, 2009 4:08 PM | Reply | Permalink
Don't forget Warren Buffet..he was urging similar last November
March 24, 2009 10:53 AM | Reply | Permalink
Investopedia is Forbes site. I'm not sure that one should look to the incestuous world of Wall Street for honest evaluations of its own.
March 24, 2009 10:56 AM | Reply | Permalink
Meaning you don't believe Bill Gross has made money or what?
March 24, 2009 11:21 AM | Reply | Permalink
Gross was also on All Things Considered last night.
March 24, 2009 11:26 AM | Reply | Permalink
The problem with Bill Gross is that he is a big holder of the senior debt of a lot of financial institutions. Therefore, if he figures out any way to pump taxpayer money into these banks, including overpaying for the toxic assets, he makes tons of money. What that means is that he can afford to lose a large chunk of his money, leveraged 14-to-1 thanks to the rest of us, on the toxic assets because it will guarantee him profit on the senior debt of the banks.
Whoever is in charge of these programs needs to divest themselves of all other interests in the participating banks.
March 24, 2009 11:30 AM | Reply | Permalink
Yeah, but he's not in charge of it. He just suggested the idea. Geithner and Co. looked at it and decided to use it.
Unless you think that all financial experts, no matter how well regarded, should be ignored. In that case, we can have non-experts like Joe the Plumber come in an offer an outsiders view. Maybe a giant plunger or some such.
Clearly, we have to differentiate the criminal part of Wall Street from the people who have legitimate expertise. Also unhelpful is the zero-sum-game thinking that anything that benefits one group automatically takes from others. (That's how the anti-immigrant crowd treats jobs -- as a pie that gets divided up, instead of how it really works)
March 24, 2009 11:43 AM | Reply | Permalink
Me no like Wall Street. Wall Street Bad. Bill Gross Bad. Burn everything down. Don't save nothin'.
March 24, 2009 11:49 AM | Reply | Permalink
Let me guess: You're an AIG employee who spends your days hoovering up taxpayer money, sipping champagne, and making snarky comments at TPM?
March 24, 2009 12:25 PM | Reply | Permalink
Either that, or he's one of those middle-class morons who keeps voting Republican in the hopes that some of those golden droplets will trickle down to him one of these days.
March 24, 2009 1:13 PM | Reply | Permalink
It's a zero sum game, you know. ;-)
March 24, 2009 3:20 PM | Reply | Permalink
It would just be nice if mainstream outlets provided context to help understand the central role that Gross, Goldman CEO Lloyd Blankfein, and other investment chiefs are playing in Geithner's plan.
Of course that would be nice but then why would we need TPM? Thanks for pointing this out.
March 24, 2009 11:36 AM | Reply | Permalink
He was on NPR yesterday, too.
March 24, 2009 3:28 PM | Reply | Permalink