The Importance of PIMCO
Devin Leonard's long profile of PIMCO bond manager BIll Gross is a bit glowing for my tastes, but it's probably worth a read. When I was reporting on financial regulation a few months ago, a couple of banking experts brought PIMCO up unbidden. The keys to cleaning up the system, they said, were PIMCO, Blackstone and a handful of other hedge funds that have spent years building the rare models that could accurately value these assets. The government couldn't do it and most firms couldn't do it. But a small number of specialist firms could.
But those few firms obviously couldn't clean out the whole of the financial sector. So they argued that the central utility of Geithner's Public-Private Investment Program was that it essentially expanded the pool of capital that the few firms able to price these assets could use to buy them -- it potentially gave them the necessary capital to clean out the financial sector. Keep that in mind as you read the profile: The reason Geithner and others are talking to Gross is that he has years of experience and a proven record pricing this stuff. They don't.