shopyield.com

Bill Gross, of Pimco, was interviewed by Kathleen Hays of Bloomberg about various Treasury programs… his whole game is to ride the Federal pony capturing significant additional spread on Treasury guaranteed assets… I guess I shouldn’t be so naive about all the private gain that is happening as a corollary of the bailout… lots of wealthy people are going to be making billions of dollars… Gross gives the lowdown on how it is done…

He made breaking news by stating that the Treasury commercial paper program (CPFF) is “very transparent“… full disclosure of the list of names of companies participating… “we know exactly what the price is” …  I guess this is a small push back to Bloomberg and others who insist that the New York Fed reveal the list of collateral that they are accepting for Fed loans…

Gross had suggested that the Treasury use a price of 65 cents on the dollar to buy up toxic securities…(when TARP was still an asset purchase program) he claimed that the Treasury would realize double digit returns at that level and that the banks would suffer substantial writedowns… he said that prices have come out for these securities… we get prices on a daily basis (note to those M2Ming – he is referring to price quotes from the major dealers… he is the biggest axe in the market other than Blackrock… of course he gets the price quotes… the dealers are lined up around the block to get his trades… and if he is getting executable quotes from the dealers then other asset managers should be also…)

Gross said that the Treasury can’t explicitly guarantee Fannie and Freddie because it would then have to bring them on it’s balance sheet and that would look bad so they play this word game but there is no doubt that these agencies are money good…

When asked about Pimco’s strategy Gross says… ” they like to ‘stay close to home’ which means to stay close to those Treasury guaranteed obligations that would include agency MBS and the members of what we call “the Club” that is Pimco’s phrase for the 8-9 large banks which received $ 125 billion in capital and we’re interested in the preferred capital if the Treasury is willing to partner with these institutions … Treasury is getting 5% yield and pari parsu with the Treasury we are getting 10-11%… what more could we want? Also the bank debt is good if they are members of “the Club” that includes not only the 8-9 big ones but the regionals… Treasury admitting 20 new members… about 60 banks admitted to “the Treasury Club”… why would anyone want a Treasury bond with a 2% yield when you can buy a Treasury Club member at 7, 8 or 900 basis points more?”