A news bite from the FP Posted, the running blog on the Financial Post Web site. I found the item particularly interesting because up until then, no one had really address how all those bad assets would be valued (Left, Bill Gross, fund manager of massive Calif.-based Pimco):By J. Sturgeon, FP, 09.25.2008
One of the more contentious issues delaying the passage of the U.S. Treasury Department's colossal US$700-billion bailout package is that no one in Washington is quite sure how much a distressed asset is worth, nor how to go about ascribing a value either.
Given the 'depths of the crisis,' stamping a value on the sour debt-backed securities and other distressed investments held by financial institutions across the United States is paramount in moving the assets onto the government's balance sheet.
But at what cost, and to whom? Paying the same firms that helped create the crisis to now measure their own carnage is not an option.
Enter William Gross, the manager of the largest bond mutual fund in the U.S., who has offered to sort through the toxic assets — for free.
“We have a large and brilliant staff that can analyze and has analyzed subprime mortgages that can help the Treasury out,” Mr. Gross, the co-chief investment officer for the Pacific Investment Management Company, said in an interview with the New York Times on Wednesday.
He added: “And I’d even be willing to say that if the Treasury wanted to use our help, it would come, you know, free and clear.”
There is a sense that a private-sector appointment for the job will create an inescapable conflict of interest, particularly in the case of Mr. Gross, who has considerable influence in the bond market.
Yet with the current liquidity crisis touching virtually every sector, any firm in a position to advise the Treasury on its rescue plan would have potential conflicts of interest, Mr. Gross, who's funds began moving heavily into government bonds at the onset of the crisis last summer, told the Times.
“There’s fewer of them here than anywhere else,” he said. “Simply because we saw the crisis coming and we don’t have much of this paper.”
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