Moe Tkacik | April 7, 2009, 2:33PM

A mere fortnight ago Bill Gross, who manages the world's largest bond fund PIMCO, was singing the praises of the Treasury Department's newly-unveiled Public Private Investment Program in the media, which the media in turn credited for the stock market rally that immediately followed. But in any event, Gross's endorsement of the plan hardly a surprise, since 1. PIMCO holds more than $118 billion in mortgage-backed securities 2. including one fund that has lost 34% of its value since its 2007 inception and 3. oh yeah, the plan was in part Bill Gross's idea. By the time the week was out PIMCO was being dubbed the fourth branch of government.

Now PIMCO is not very subtly distancing itself from the PPIP, which has only gotten less popular as its details have emerged. This morning, on the heels of yesterday's stock market selloff that accompanied the Treasury Department announcement that it was extending the deadline for PPIP applications and clarifying that applicants would be considered "holistically" (i.e. that demonstrated ability to raise $500 million requirement is now more like a rule of thumb) PIMCO Chief Investment Officer Mohammed Al-Arian went on Squawk Box to talk markets with celebrated (by CNBC anyway) stock picker Mario Gabelli, who couldn't resist getting in a dig at PIMCO for the plan's self-defeating "competitive restraint." The fun starts about 7:54 in, transcript after the jump.

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Topics: PIMCO

Bailout

Firms Hired By Fed To Manage Our Assets Won't Say How Much They're Being Paid

Zachary Roth | January 2, 2009, 2:09PM

So, how much are the four firms hired to manage the Fed's mortgage-backed securities purchase program getting paid for their work, and how did they get the contracts in the first place?

They're not saying.

We called Blackrock Inc., Goldman Sachs, Wellington Management, and PIMCO to ask them about their recently announced contracts to manage a total of $500 billion worth of mortgage-backed securities, on behalf of the Federal Reserve. Spokespeople for the first three firms told us they were referring all questions to the Fed. Representatives for PIMCO -- whose founder said in September that his firm would manage a very similar Treasury program for free, out of patriotic duty -- have not responded to two messages.

A spokesman for the New York Fed told TPMmuckraker he'd get back to us with more information.

"The selection of these managers seems incredibly opaque," Jeffrey Gundlach, the chief investment officer for the invesment firm TCW, and an expert in mortgage-backed securities, told TPMmuckraker.

Indeed, the Fed has so far provided little detailed information on the process by which these firms were selected. In a fact sheet posted on their website, the Fed wrote:

Because of the size and complexity of the agency MBS program, a competitive request for proposal (RFP) process was employed to select four investment managers and a custodian ... The selection criteria were based on the institution's operational capacity, size, overall experience in the MBS market and a competitive fee structure.

We'll keep you posted on what we learn from the Fed...

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Topics: Bailout, Ben Bernanke, Federal Reserve, PIMCO, Wall Street

Federal Reerve

Gross Profits: PIMCO Hired To Manage Bailout That Benefited It

Zachary Roth | December 31, 2008, 3:09PM

Over at TPM, we noted earlier today the news that the Federal Reserve has hired four investment firms -- BlackRock, Goldman Sachs, PIMCO and Wellington Management Company -- to manage its mortgage-backed securities purchase program, in which it will buy up $500 billion worth of mortgage bonds, in an effort to boost the housing market.

It'd be nice to know more about why all of these companies were selected, and how much they're being paid -- and we've put those questions to the Fed. But for a number of reasons, one of the four firms, bond giant PIMCO, stands out as a particularly interesting choice.

As of June 30th, 61 percent of PIMCO's holdings -- $500 billion -- were in the very mortgage backed securities that it's now being hired by the Fed to buy back on behalf of US taxpayers, according to a September Bloomberg report that cited data on PIMCO's own website.

That could explain why, as financial blogger Rolfe Winkler pointed out earlier today, PIMCO chief Bill Gross was sounding the alarm in early September about the disastrous fate that would befall the US economy unless the government started buying up troubled mortgage assets.

In a September 4 post on PIMCO's website, Gross warned:

If we are to prevent a continuing asset and debt liquidation of near historic proportions, we will require policies that open up the balance sheet of the U.S. Treasury.

Within days, the Treasury had done what Gross was asking. In other words, as Peter Cohan, a professor of management at Babson College, put it at the time in a post on Bloggingstocks.com:

Bill Gross, who manages $830 billion, has convinced the U.S. Treasury to use your taxpayer dollars to bail him out of his bad investments.

And Gross seems to have had his eye on the endgame for a while here too. Later that month, he argued in a Washington Post oped that a broader bailout -- what became the TARP -- was also desperately needed, and he seemed to suggest that his own PIMCO would be a perfect candidate to manage the funds.

He wrote (via nexis):

Calls for appropriate oversight of this auction process are more than justified. There are disinterested firms, some not even based on Wall Street, with the expertise to evaluate these complicated pools of mortgages and other assets to assure taxpayers that their money is being wisely invested. (itals ours)

PIMCO, or the Pacific Investment Management Company, is based in Newport Beach, California.

In an interview shortly afterwards with CNBC's Erin Burnett, Gross presented his willingness to take on that job as a patriotic stand, pledging that PIMCO would work for no fee, "if everybody else worked on the same basis." (It's around the 4:25 mark).

And now the Fed has given him what's essentially the same job.

Will Gross stand by his pledge to work for free? We've called PIMCO to ask, and will keep you posted on what we found out. But given how Gross has made out so far, we're not holding our breath.