With Friends Like PIMCO, Treasury Hardly Needs Enemies
The co-CEO of the Pacific Investment Management Company, which currently employs former TARP head Neel Kashkari — whose job it was to rescue the U.S. economy — is no longer as in love with the Treasury as he once was. Today, and despite the deepening concerns about a Europe-wide financial crisis spurred by the Greek debt crisis, Mohammad El-Erian announced that he’s far more interested in acquiring German Treasury bonds than U.S. ones. He said:
As we stand today, we prefer to take interest rate risk like government bonds in Germany which has much better conditions than in the United States. … When it comes to currency risk, we like to take it in places which have the strongest fundamentals. What we are focusing now on is to see where the strongest fundamentals.
As the Business Insider’s Joe Wiesenthal noted last year, PIMCO was a major secondary beneficiary of the financial market bailout, because they held a great deal of bank debt in addition to being, as Sitka Pacific’s Mike Shedlock noted, way over-invested in mortgage-backed securities — and underinvested in Treasury bonds.
But now Wall Street likes Republicans more than Democrats, Obama seemingly intends to focus on bailing out the people — mortgage holders — hurt by all the mucking around in mortgage-backed securities that PIMCO and the banks did, and the U.S. government is issuing more debt to finish fixing the financial crisis caused by the collapse in the housing market. In Germany, on the other hand, taxpayers may soon bail out a couple of countries, rather than just the banks. It’s no surprise, then, that PIMCO is getting out and heading to Germany; after all, there’s probably more money to be made in the bailout of an entire government than in just one economic sector.