“if we are to prevent a continuing asset and debt liquidation of near historic proportions, we will require policies that open up the balance sheet of the U.S. Treasury…” Bill Gross, September Investment Outlook

This guy continues to disgust me. If Americans before him had held the notions about markets that he does, there would be no wealth for him to manage, and he would not be a billionaire. This would be Venezuela.

Here is an excerpt from his latest bailout plea:

This rarely observed systematic debt liquidation is what confronts the U.S. and perhaps even the global financial system at the current time. Unchecked, it can turn a campfire into a forest fire, a mild asset bear market into a destructive financial tsunami. Central bankers, of course, adopting the cloak and demeanor of firefighters or perhaps lifeguards, have been hard at work over the past 12 months to contain the damage. And the private market, in its attempt to anticipate a bear market bottom and snap up “bargains,” has been constructive as well. Over $400 billion in bank- and finance-related capital has been raised during the past year, a decent amount of it, by the way, having been bought by yours truly and my associates at PIMCO. Too bad for us and for everyone else who bought too soon. There are few of these deals now priced at par or above, which is bondspeak for “they are all underwater.” We, as well as our SWF and central bank counterparts, are reluctant to make additional commitments.

Step 2 on our delevering blackboard therefore has stalled and is inevitably morphing towards Step 3. Assets are still being liquidated but there is an increasing reluctance on the part of the private market to risk any more of its own capital. Liquidity is drying up; risk appetites are anorexic; asset prices, despite a temporarily resurgent stock market, are mainly going down; now even oil and commodity prices are drowning. There may be a Jim Cramer bull market somewhere, but it’s primarily a mirage unless and until we get the entrance of new balance sheets, and a new source of liquidity willing to support asset prices. …

A Depression-era bank robber named Willie Sutton once said that the reason he robbed banks was because “that’s where the money is.” Illegal for sure, but close to an 800 SAT score for logic if you were in the business of stealing other people’s money. And now, while some will compare current government bailouts to Slick Willie, citing moral hazard, near criminal regulatory neglect, and further bailouts for Wall Street and the rich, common sense can lead to no other conclusion: if we are to prevent a continuing asset and debt liquidation of near historic proportions, we will require policies that open up the balance sheet of the U.S. Treasury – not only to Freddie and Fannie but to Mom and Pop on Main Street U.S.A., via subsidized home loans issued by the FHA and other government institutions. A 21st century housing-related version of the RTC such as advocated by Larry Summers amongst others could be another example of the government wallet or balance sheet that is required during rare periods when the private sector is unable or unwilling to step forward.

The bill for our collective speculative profligacy, obvious in the deflating asset markets, can be paid now or it can be paid later. Those aspiring for a perfect 800 on the Wall Street policy exam would conclude that the tab will be less if paid up front, than if swept under a rug of moral umbrage intent on seeking retribution for any and all of those responsible. Now that the Fed has spent 12 months proving that it “knows something…knows something,” it is time for the Treasury to do likewise.

Sorry, Bill, I’m not scared. Systemic debt liquidation is exactly what the country needs right now, and actions like this are exactly what laid the groundwork for this bubble, by absolving bankers and guys like you from responsibility for your actions. To repeat these mistakes on such a massive scale would distort our economy into a perverse and Orwellian system for the sole benefit of politically connected billionaires.

Is Gross really that cynical?

If he’s not cynical, he’s dumb, and I doubt any self-made billionaire investor could be this dense. As Carl Denninger points out, Gross bought much of this mortgage debt over the last 12 months, at a big discount, surely with the full intention of lobbying for a bailout of his positions (he has been using his column, media appearances, and certainly contacts in Washington to do just that). A man with this kind of character could only be rewarded with wealth and prestige in a society that has gone completely off the deep end. Time to drain and scrub the pool.