A day after telling The New York Times that Pimco would help the Treasury Department manage the bailout portfolio pro bono, the firm's founder Bill Gross appeared on
CNBC Thursday morning and said the banking system needs another $500 billion to survive beyond the $700 billion rescue plan.
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"Ultimately a recapitalization of the banks is required. ... This plan
goes far, but it doesn't go far enough as far as recapitalization," he
stated. "The banking system and the investment banking system in total
really require about $500 billion more, and where it comes from is still
up in the air."
Gross added that the government bailout plan will help free up bank
balance sheets so they can start lending again, but will provide only
about $50 billion in real capital.
Gross was in favor of the bailout and said that it was a good
investment and could
yield a profit of 7%. "It's a simple idea to look at this program as an
investment rather than a bailout. ... The spread, the 700 basis
points of the 7% spread, provides an equity-like return on
their investment. It's a great deal," Gross said.
And Gross isn't just offering verbal support for the plan, he's proposed to help implement it by offering Pimco's analysts to help sort out the loans. - Maria Woehr
See video from CNBC
See related story from The New York Times
