"...the U.S. government needs to start buying assets to stem a burgeoning ``financial tsunami,'' according to Bill Gross, manager of the world's biggest bond fund. "
Let's be clear.
Bill Gross, knowing that this delevering was going on, has gone into the market and bought these "assets" at a fire-sale price.
He was not "stuck" with them due to unfortunate circumstance - he purchased huge amounts of these"assets"after the credit crisis had begun, and the subprime slime, along with the rest of the overleverage in the financial system, not only was known to people like Roubini and Mish, but also reported in the major financial press - that is, it was public, common knowledge that these securities were crap.
Now, having done this, intentionally, he once again comes to the microphone not to ask that America be bailed out, but that he be bailed out of a bad bet that he knowingly made.
This is the mess that we get into when we practice "moral hazard".
In fact, let's call this what it is -attempted robbery. It is not an attempt to help Americans, it is instead a demand to rig the market for his firm's profit, which is supposed to be unlawful.
See, "moral hazard" is the process by which people will tend to take more risk than they otherwise would, confident that the government will step in to help bail them out if things go bad in the future.
This is different.
This is the purchase of securities that one knows are impaired in the present, then demanding that the government come in and make your bet - which you got at a very cheap price because the market believed the securities were impaired or even worthless -pay off for you, not for The People.
Congress, The Fed, President Bush and both Presidential candidates need to get out in front of this issue right here and now and say that there will be absolutely no bailing out of people who knowingly took risk such as Bill Gross did with PIMCO's "overweighting" of mortgage-backed assets after the meltdown had begun.
In short the government needs to tell Bill Gross and PIMCO to "get f***ed", in English,releasing that statementpubliclyto the markets so there can be no mistake what the message and position of the government is, now and in the future.
Where We Are, Where We're Heading (2013) - The annual 2013 Ticker
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