The world’s biggest bond fund, Pimco, says the Fed needs to double the liabilities on its balance sheet to save the economy.
Does anyone see a possible conflict of interest here?
The government hired Pimco to help run its mortgage-backed securities purchase program – a program which benefitted Pimco. Specifically, as of June 30th, 2008, 61% of Pimco’s holdings were in the very mortgage backed securities that it was hired by the Fed to buy back on behalf of American taxpayers, according to a September Bloomberg report that cited data on Pimco’s own website.
The government also hired Pimco to advise it of the value of $118 billion of assets guaranteed in the bailout of Bank of America.
There are a couple of other quasi-governmental hats which Pimco is wearing as well.
In addition, Pimco is buying toxic assets through the PPIP program.
It appears that the bigger and more numerous the government bailout programs, the more money Pimco makes. So I’m not sure that Pimco is the most independent, objective observer on the government’s response to the economic crisis.