Pimco’s legendary bond investor Bill Gross said during “Street Signs” Thursday that his firm would be staying out of any and all bank offerings for the foreseeable future.
Banks the world over have raised $400 billion in capital, Gross said, and may need to raise much more. The problem, though, as yesterday’s $1.5 billion preferred offering at Wells Fargo showed, is that the institutional buyers are full, leaving only small investors to pick up the slack.
As Gross said, “There’s only so many billion and a half small investor bank capital deals that can be done from this point forward.”
Wells Fargo Executive Vice President and Chief Financial Officer Howard Atkins, in a later interview with Cramer, disputed the claim.
“It was very much an institutional transaction," he said. "I’m not quite sure it’s being characterized as being something different.”
Atkins said that over 100 institutions took part in the offering, adding that it was "successful" and "well oversubscribed."
But as far as Gross is concerned, if Fannie Mae, Freddie Mac, Citigroup and Merrill Lynch hold offerings to raise capital, Pimco will be sitting them out.
This puts Henry Paulson and the Treasury Department in position to have to act. Washington has been holding on any kind of bailout, hoping that buyers like Gross will keep struggling banks afloat. But by refusing to take part, Gross, the biggest bond buyer in the world, is in effect calling the Treasury’s bluff.
Erin Burnett called it Gross’ “They know nothing!” moment, like Cramer’s rant at Ben Bernanke and the Federal Reserve.
If Paulson and the Treasury stepped in, Cramer said, “then we would have a miraculous moment.”
“Until we get that, why should he lose his investors’ money?” Cramer asked. “This guy is the best. He’s big enough that unlike anyone else in the world he can actually have that impact.”
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