What Makes a Keynesian Smile?

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A government bailout, especially one that benefits him personally. I lost respect for the Bond King, Bill Gross, when he started chanting for unmitigated intervention in the financial markets. He basically became unhinged, repeatedly harping on the need for big government to bail out or subsidize everyone and everything. His latest article is no different. PIMCO’s Bill Gross is a huge investor in mortgage-backed securities. Thus he has been bucking for the U.S. Treasury to bail out Freddie Mac and Fannie Mae. A failed Freddie and Fannie would have resulted in billions of dollars lost for PIMCO’s investors. When the government bailed out Fannie and Freddie, they also bailed out Bill Gross and PIMCO. Here’s an excerpt from an article on Bloomberg:

“They have to open their wallet,” Gross said, predicting that the Treasury will act this weekend before the Federal Housing Finance Agency releases an assessment of Fannie’s and Freddie’s capital. About 61 percent of Gross’s holdings were mortgage-backed securities as of June 30, mostly debt guaranteed by Fannie, Freddie or government agency Ginnie Mae, according to data on Pimco’s Web site.

In another article on Bloomberg, there’s this quote:

For Bill Gross, manager of the world’s biggest bond fund at Newport Beach, California-based Pacific Investment Management Co., today’s announcement was good news.

“We own lots of mortgage-backed bonds, and I would expect on Monday and in the ensuing weeks for them to do very well,” Gross said in a Bloomberg Radio interview. “So yes, I’m smiling at the moment.”

Depending on what you read, Bill Gross of Pimco Funds makes approximately $40 – $50M per year in salary. But he takes the high ground and claims that the real beneficiaries of financial socialism and wealth distribution are Mom, Pop, and Main Street.

9:42 pm on September 8, 2008