How seriously should Treasury Secretary Geithner, Chairman Bernanke, and co. take Pimco/Bill Gross's threat to stop buying U.S. mortgage-backed securities if the government stops guaranteeing them?
It wouldn't be the end of the world. There are plenty of other buyers out there. Mr. Gross already led the Treasury and the Fed down the wrong path once in advocating the extra-legal expropriation of Fannie Mae (OTCQB:FNMA) and Freddie Mac (OTCQB:FMCC). (See previous coverage here, here, and here.) That made Pimco a reported $1.7 billion (more than enough for Mr. Gross to buy an 11,000 square foot, nine bedroom, 12 bathroom house for $23 million that he plans to tear down), but at the huge expense of Fannie and Freddie equity holders, the taxpayers, and the broader U.S. economy.
Mr. Gross is of course free to advocate his position as much as he wants, but people should understand that, like Warren Buffett, he is an interested partisan player, not a disinterested spectator.