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Rating:Gross Sees Treasury as Fannie and Freddie's Partner Not Rated 0.0 Email Routing List Email & Route  Print Print
Thursday, August 07, 2008

Gross Sees Treasury as Fannie and Freddie's Partner

Reported by Sean Hanna, Editor in Chief

Bill Gross is getting play for comments to Bloomberg in which he predicts that the U.S. Treasury will step in to buy preferred shares in Fannie Mae and Freddie Mac. The Pimco bond fund manager and CIO told the news service that the payments could reach from $10 billion to $30 billion.

He predicted in an interview with Bloomberg reporter Kathleen Hays that the to GSEs will issue preferred stock that will be purchased by the Treasury in a bid to bolster their capital position.

Pimco holds about 1.5 million common shares in Fannie Mae, according to Bloomberg.

"I think, Kathleen, by the end of the third quarter - and that's, what, two months from now - by the end of the third quarter, that preferred stock in Fannie and Freddie will be issued, that the Treasury will have bought it, despite the fact that they suggest they're only going to think of it and that we'll be on our way towards a joint Treasury-agency combination," said Gross.

"I would think that if the Treasury comes in, in a big way in terms of buying preferred, which is what we expect, we're talking $10 billion, $20 billion, $30 billion before it's all over for each particular agency that the common shareholders will be subordinated significantly," he added.

Read the whole interview here

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