Shocker: Media Let Wall Street Chieftain Praise His Own Idea

March 24, 2009 5:28 am

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.

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