Lord knows many financial experts as well as us regular folk bloggers immediately saw the flaws in U.S. Treasury Secretary's PPIP plan, now it appears from Bloomberg's headline Geithner’s Non-Recourse Gift That Keeps on Giving to Bill Gross the press is piping up too:
Treasury Secretary Timothy Geithner’s plan to rid banks and markets of devalued assets may be a boon for Pacific Investment Management Co.’s Bill Gross.
The plan may reward investors with 20 percent annual returns on “really toxic” mortgages bought at 45 cents on the dollar by allowing them to borrow six times their money with “non-recourse” government-backed debt, New York-based Credit Suisse Group AG analysts Carl Lantz and Dominic Konstam wrote in a March 27 report. That loan would be worth 15 cents to an investor seeking the same return who can’t use borrowed money.
Bill Gross calls this plan a win/win/win but that not quite it. It's a win/win/lose where the taxpayers are the losers. Then there is that fundamental problem of trying to sweep the derivatives under the rug. (What's that stink?)
I went looking for further information on just how much money Pimco had made and found this gem, $12.8 trillion (90 percent of GDP!) to bail out bad bets:
These beneficiaries are just the tip of the iceberg. For example, a German insurer, Allianz, owns PIMCO -- which runs $800 billion in various bond funds -- whose manager Bill Gross made undisclosed profits pushing for the Fannie/Freddie bailout which helped out the value of his GSE bond portfolio. Gross's PIMCO also advises the U.S. on its $251 billion commercial paper program and its $500 billion fund to buy mortgage-backed securities