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Bill Gross Issues Ultimatum: GSEs Keep Government Guarantee Or Else
In an interview with the FT, Pimco's Bill Gross flatly warned the government, in advance the housing finance conference that will begin deciding the fate of the GSEs next Tuesday, that unless Fannie and Freddie bonds retain their government guarantees, he would cease purchasing GSE debt. On the other hand, Gross may have overplayed his card: he already took the government for the proverbial ride, loading up the flagship TRS fund with GSE debt in early 2009 and riding the surge higher for the entire year, then selling virtually everything: TRS has just 16% of its $234 billion in AUM in mortgage securities as per the latest Pimco Fund update. Nonetheless, the Newport Beach bond pundit's warning is a clear shot across the bow indicating just who is the primary force in GSE decision-making, right after the Treserve.
More from the FT:
The Treasury currently backs the debt of Fannie Mae and Freddie Mac, which in spite of ballooning losses are propping up the housing market by buying or guaranteeing new loans. Some conservative politicians and policy experts have suggested that the agencies should be privatised and the government’s involvement curtailed.
Mr Gross, the co-founder of the Pimco and manager of its $3.4bn Total Return Fund, said such a move would, in effect, cause him to withdraw from the market.
“Without a government guarantee, as a private investor, I’d require borrowers to put at least 30 per cent down, and most first-time homebuyers can’t afford that,” said Mr Gross, who will be one of the most prominent private sector participants at the August 17 conference.
While PIMCO is certainly entitled to its opinion as a private institution, his statement effectively confirms that any attempt at GSE reform is a wash. It also reaffirms our concerns about monopolies in the market, whether it be Pimco in the bond market, BlackRock in ETFs, or Goldman in everything else. The three firms can pretty much singlehandedly shut down the market if there is some policy decision they disagree with, as they control all three key critical verticals in capital markets currently. As such, it behooves the next administration (speaking of washes) to cast a long hard look into mitigating monopoly threats presented precisely by funds such as Pimco which control over $1 trillion in AUM, as well as every other firm that could use the same Mutual Assured Destruction card we have all grown to know and love as part of the financial crash, only this time proactively instead of reactively.
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Are we going to see some Gross Donk action on PimpCo's Bill?
Does this make Gross a bond vigilante? Next thing is for Gross to appear on CNBC TV draped in the American flag.
<sigh> God Bless Bill Gross. </sarcasm>
No, I think that makes him a realist.
I always laugh when I think that the only difference between a senile old man and an eccentric is money. The same can be said about Bill Gross. I would be termed a whiner or a poor loser if my trades were beginning to slide in the wrong direction and I complained that government policy was the culprit. Bill Gross, with $1 Trillion of assets under management and thus plenty of blackmail material on hand, is a realist and only protecting his shareholders.
Only in America can someone who games the system engender sympathy and wiggle room. If you don't have money, you're a bum. If you have plenty of money (or you owe everyone within flying distance lots of money) you're a capitalist and a leader of society.
Good observation, CD
Never knew a weakling who whimpers like a girl can wield so much power. Well, CD explained it. But when the world falls into chaos, he and the other rich folks wouldnt survive the new world order because money does not buy loyalty, trust and desperation. Especially when everyone else have nothing more to lose.
well drawn profile of professional hypocrisy and rank mendacity.+++
Meh, I dunno. Assuming you're not a PM, I think it's a material difference that he's acting in a representative capacity for others' money and you're not. Maybe in fairness you'd both be whiners or poor losers -- but in Gross's case, that's part of the job description. He needs to do whatever he can for the stakeholders in his funds. Part of the role might be unsavory, but he plays the role well.
Yup, the corrupt system, corrupt overlords and corrupt FED made Bill Gross corrupt, though most certainly not by his choice. They made him do it.
I do understand you're point and I do run money. So I understand the concept of "fiduciary responsibility" very well. I also hate a system where I'm forced by consensus opinion and so called "market rates" to put my clients into a rigged system of inflated bonds of any persuasion in search for income they need to live.
Why? Because the Fed has sat on interest rates for so long and so hard that my clients can't live off their money any other way than to take more risk that they even understand or could survive. So I hedge and hope the hedge holds when TSHTF.
However, Bill Gross is a big boy. He's not captured by the system. HE IS THE SYSTEM. So he's not forced to make these decisions, he makes the system the way it is (along with a small cabal of others) and then excuses himself by saying "They made me do it." He's the one doing the steering, not the one who's in the back screaming in terror.
In other news, dog bites man -- then gets put down.
Wow, a bond unvigilante.
Now I've seen everything.
gross is G A Y .
What we see is the shoving and sharp elbows at the point in musical chairs when everyone sees the phonograph needle being lifted off the record (analog image, sorry). Extend and pretend for GSE, P&L, UST and FRN is unwinding, slowly now and soon with more acceleration. Watch the little golden-haired and Euro child get shoved to the floor first, though. The crowd is playing ever rougher as fewer chairs are left in the game. Lehman/Bear were the first out of the game.
OT: The Automatic IRA plan
Senator Jeff Bingaman, a New Mexico democrat, introduced the Automatic IRA Act of 2010 last week. The new legislation would require all firms with 10 or more employees that don't already offer a retirement plan to automatically enroll workers in an IRA...
... The default investment for new savers would be a R-Bond, a new type of Treasury Retirement Bond that would be designed for use with the Automatic IRA...
How annoying. When I started working for my current employer, they automatically enrolled me in their 401k (3% of my pay). They never informed me of this, so it's a good thing I read all the paperwork in my 'new employee' binder. Screw that - don't try to force me to do something that is none of your damn business. I have my own method of saving. And if it comes retirement time and I have no savings, that should be my problem, not anyone elses. Stupid welfare society makes me sick.
good for you ! that's how we got into this mess in the first place. my Grandma Jo never had any "retirement account" ! & she managed to do very well SAVING & GROWING her account because "back in the old days" WE GOT PAID INTEREST FOR SAVINGS on ACCOUNT in BANKS ! CAN I BLAME ROBERT RUBIN FOR THIS, TOO !!??
What is this "interest for savings on account in banks" you speak of?
Interest on Savings? You speak with forked tongue.
The only interest the US populace has is on spending. Just ask my wife.
Agree with you 100%.
My wife opted not to participate in their company 401. She was prodded many times to sign up, as she was "losing out on" the company match.
We take the money she would have otherwise contributed, and regularly spend it at APMEX.
If we are betting wrong in the longterm, (unlikely IMHO) than my pension will provide. If we're right, we're hedged. Either way, it's our cross to bear. It shouldn't be anyone elses problem.
in agreement with you completely.
problem is that there is a huge population that is chomping at the bit to make this a govt responsibility, likely because they've not done anything about retirement for themselves, so we're getting dangerously close to total govt control of the retirement system and that worries me.
They will end up commingling the funds of this new savings vehicle with Social Security. They are basically inventing another Peter to steal from so they can pay Paul. Our leaders should be tared and feathered and imprisoned.
thank you for saying this. i would like to openly say the same things, such as , "Charge Robert Rubin & Larry Summer & Alan Greenspan with treason & imprison them, " however, I do not dare such things for fear someone will come after ME !! Isn't it strange how the TRUTH-TELLERS are the ones who are tarred & feathered !
Well ya know, thinking is hard, especially if it involves self-determined financial planning.
I was under the impression this was still optional. I am aggrivated the enrollment is automatic, but I believe you can still opt out. I will not be surprised when it becomes mandatory however.
Yes, they need to fill the mutual fund outflow that continues to come from baby boomers.
As I noted in these pages months ago, the Treasury will cook up something I like to call PABLUM ... Pension Anticipation Bonds Liquid Upon Maturity.
Maturity = your demise,
Liquid means that the wealth they represent will be liquid to the Treasury.
Spot on!
"Take a look around you, all you see is sympathetic eyes..." Simon and Garfunkle
Great Post - Thank you
Been 100% in Pimco Total Return since January in my 401k, and loving it. I will stick with Bill Gross, over Benny Boy and Tax-evader Timmy, any day of the week.
Profiting by strongarming the government into making disastrous choices isn't what I would call sound investing. Enjoy having your 401K seized, and having any other dollar denominated savings inflated to nothing.
My money is on politicians making the easy decision over the right one.
http://images.wikia.com/openserving/sports/images/5/5f/1187035246_Nfl_ap...
Sell yer friggin stamp collection too while yer at it.
Are those things losing value yet? I don't see those collections being worth much to the digital generations. Who uses stamps anymore?
Before you know it they will all but disappear.
Stamps have been in a horrendous bear market since about 1981. I occasionally talk to dealers about it. They say the only real buyers are boomers who are now back filling their collections with accrued wealth. I have yet to see a trigger that would end that bear market.
My mother stopped adding to her collection in the late eighties. She worked at a bank with a post office next door to it and when she retired the stamp collecting got retired too. :-) I have no idea if she still has them or not.
If purchased at a post office, they are worth about 50% face value. They cannot even be used for postage easily. (I am not exaggerating.)
The only monopoly in this discussion is the government that creates ther mortgage market w/ this suppossed guarantee and then wants to take it away and expect people to participate in it as they have in the past. The government is welcome to take the gurarantee away and pimco as the largest player in the market (I don't know if this is true) I think the largest GSE buyers are foreign governments are welcome to not participate any more. All of this is for show anyway. It is pandering to the "free market crowd " with a conference when everyone knows that if the gurantees on GSEs falls apart the gig and I mean the whole gig is over.
... I thought the U.S. was bankrupt ! why does this madness continue, just let it all fall & we'll start over. I'm ready for it, it took me two years to get myself to even confront the fear, but, i'm now ready for whatever comes my way......... let's get it over with.
Hard to see the big deal here - he won't invest in rubbish if it's not backed by the u.s. govt.
Moving on....
(i know, i know, rubbish backed by rubbish is still rubbish)
Bill Gross's moustache bitchez!!!!!!!!!!
Gross (rational economic player) vs. Treserve (irrational socialist player). I'll take Gross every time.
Bill Gross is just preping them for when China does the same things with Treasuries. Think of it as a scrimage before the big game.
OT: anyone else think the daily chart looks an awful lot like the May 5 flash crash?
It appears that it's starting to set up that way. If we slowly sell off all morning on Friday, we might just have some excitement around 1 PM.
Bluff. The fed can just buy those up too.
+1. Can and WILL.
"it behooves the next administration"
as if...
If I was doing home loans I'd want 30% down too if it wasn't backed by the Treasury.
That being said, I totally agree with the sentiment that these companies are too big when they affect policy and the markets in the way that they do. Break them up.
ZH'ers, here is the REAL problem.
Remember: Bernanke admitted to congress a few days ago the Fed illegally purchased over $1,200 billion of FMCC/FNMA paper. Probably to save banksters and paid 100% of face value and the Fed, now being caught illegally purchasing such devaluating paper, must unwind this and by loss suffer virtually zero loss (impossible of course). So now the Fed is trying to find a way out without being taken to task for their illegal purchase while getting virtually full face value on this devaluing paper 'investment' holding. The Fed has it's back to the wall and is gravely concerned if Fredd/Fann gets punted from the US Gov guarantee.
And if we want to discuss fraudulent accounting, if the Gov covers Fedd/Fann then it should be part of the US National debt of course... which it is not.
I thought Bernanke has always insisted the purchase is legal.
I believe the Bernanke definition of legal is - If there are no cops banging down his door the day after to take him away in handcuffs, then the purchase was LEGAL.
Without SPECIFIC and IMPLICIT guarantee it is ILLEGAL. Look at the cover sheet of Fredd/Fann and it says NOT guaranteed.. and thus illegal for Fed to purchase. But if they get called on it, that starts the avalanche of what Fredd/Fann truly is and if guaranteed, then it needs to go on National debt and that, in turn, brings up trillions more to the National debt... See the financial/political problem a bit better now?
+1
Everybody re-read that.
Everything you and Ned Zepp said is dead on the mark.
It appears Bernanke went into the MBS and Agency Debt purchase deal with some confidence that the underlying debt would be guranteed. And I think the Fed and Treasury have worked under that assumption all along.
Obviously, the Treasury doesn't want to look and Fannie and Freddie debt as fully-backed because doing so world force the issue of putting the potential losses on the balance sheet. It's not trivial, becuase Agency debt could be a $5 trillion black hole.
I think Bill Gross just wants it to be known that the Federal Reserve better not give in on the government guarantee issue. I don't think the Fed cares one way or another, given their ability to print whatever needs to be printed. With PIMCO sitting on billions of Agency debt, though, I'm sure Bill Gross cares quite a bit.
Exactly, the Fed can just print it up so no big deal per se ans the Fed LLC can handle any 'loss' of Federal Reserve Notes (US Dollar)... yet PIMP.CO would be stuck high and dry should the Gov punt Fredd/Fann.
Actually, I would be willing to wager PIMCO would echo what has been done at Black Rock & Maiden Lane. That is start "active management" of the FED FNM/FRE paper and the associated income streams and transfer whatever remaining liabilities P-Co might have into the fed's pool of managed assets. The best part is that P-Co can collect millions in additional management fees along the way while ensuring that any transfers were properly timed.
Looks like the Gross whining could be a Gross plan that backfires in his face. If you bring up an issue in your dysfunctional family, the family may have to confront it. Careful what you ask for. The whole system is gridlocked in Catch 22s across the board.
Two words for Mr Gross...
Fuck You.
Why? He just spelled out in plain english that the Government has a vested interest and therefore difficult choices to make about setting the pace of real estate recovery.
Because that asshole wants me and you to continue down a shit hole and support these losers so he can gaurantee a profit from them. Fuck him. He wants me to continue to spend what I don't have to support these things that shouldn't exist in the first place, all so he can continue to invest in them to make himself some gauranteed money. FRE and FRN should be killed NOW.
That's the Government's choice. Take it up with them.
Technically it's our choice.
But since "we" the American people have abdicated our primary duty to hold our leadership accountable for at least the past 3 (and arguably 5) decades we really don't have any say in the matter at this point.
The governments? hmmm
Well said (sort of).
Alright, Bill Gross is a pretty smart guy, we can probably all agree.
But, why is he investing client assets in a GSE market with no fundamental prospects. He admits the standards aren't enough if he was the lender, but he still invests in the product. What???
Can't argue with his returns, however, it only shows me that BG is in cahoots with the treserve.
Good job, Bill, way to show your cards!
Incredible isn't it.Why invest in a bk entities ? Oh..I see because you are complicit in the Fed gravy train coming out of the pockets of the taxpaying middle class.
He invests because the taxpayer has guaranteed his return. So we as taxpayers should put all of our savings in his TRF and the circle jerk will be complete.
He stated the obvious. Mortgages require substantial downpayments. And to him, it makes no difference where it comes from.
But that's the reality.
Good times.
Now we've got fund managers strapping themselves with explosives and screaming, "if I go, we all go!"
Awesome.
P.S. gotta love that term "The Treserve"
Well said - is this the equivalent of a 'homicidial (suicide) bomber'? - What would the Taliban do?
Hey if it were up to me, I'd send the Department of Homeland Security to Wall Street.
Geez, the GSE's are looking like a money pit that will go on well... forever. At some point in time I think the US has to face the reality regarding the housing market...
Gross reveals what is under that docile exterior when he needs to. In my opinion, if the system was straight, his designing of the bailouts followed by frontrunning them would have gotten him 20 years in Club Fed. On the other hand, if it was straight, he would not have had the ability to design the bailout. He is slowly but surely crawling into the same weasel den as Warren Buffett who, as a stock jobber, is world class but can also be a world-class liar also.
We should consider why these three firms are so big. It is because there is an enormous amount of money out there that needs to be held and invested. And why is there this enormous pile of money, money that essentially has no permanent home, money that is presumably the savings of people and profitable enterprises. The problem is there is more money then needed, more money than can reasonably be invested in any beneficial way. Money that is just sloshing around causing bubble trouble. Until most of this money is destroyed we will continue to have problems.
The root cause of our problems is the financial framework that allowed this money to be created and concentrated in so few hands.
Yes, this is in essence the other side of the country's balance sheet from our public debt: private wealth. The aggregate amount of it is sort of unbelievable, as is the idea that the majority of Americans actually don't have a large enough share of it to retire on.
To the degree that the public debt is considered in need of retirement, it is this private store of wealth that will do the job. It can either be done directly--via taxation and repayment, which given the way our political system works now seems pretty unlikely--or else indirectly, via currency debasement, which is the end result of monetization, repudiation, or restructuring; the major difference is how much drama is involved.
Behooves? Ok, explains all the horseshit.
Regards.
Sell the multifamily platform to cover losses on the single family portfolio and stop bleeding taxpayers.
I predict Gross will lose, and big-time, on this thinly veiled threat. The government's guarantee of the GSEs is by design a temporary measure. The Govt cannot afford to have the GSEs explicitly and permanently on its balance sheet, and thus has been playing this game with temporary guarantees and "assurances of continued liquidity" without allowing those to morph into a permanent full faith and credit guarantee.
Bill: might as well start selling, since you're not going to get this. And I'm surprised at you for asking, given the risk of tanking your own portfolio. Oh, what's that? You're going "all in?" I thought a big card game might be in progress.
Are you kidding? I wish you were right, but the government is in a position now where they will not har to explicitly guarantee anything but can benefit by the implicit guarantee. If you ask them they say, what guarantee? That's why it's not on the balance sheet as a liability. Bill gross will still win though because they do have an implicit guarantee and will continue to for the foraeeable future. I'm not faulting gross for betting on a sure thing, I mean who wouldn't? I'm just saying it's wrong that such a sure thing should exist when it will eventually have to be paid out on and blow some really big shit sky high. As long as they can pretend it's not a liability and benefit from the fact that it is, nothing will change. A REAL bond vigilante could take a position against them and try to drag them into court to force them to stop pretending.. But I don't know if there is some special exclusion that means no court has jurisdiction over that stuff like we saw with the auto bailouts... So it may just go on until it explodes in any case.
Oh boy, Max Keiser is gonna have a field day with this one. Financial terrorists!!!
Screw a *guarantee*... The GSEs ought to be in runoff mode right now.
Banks made out just fine for centuries without any concept of securitization. They'll manage to make do carrying covered bonds on their books.
And let's not forget what a good job savings & loan associations did in this area before Reagan's cronies got hold of them and extracted every penny they could before ruinning the whole industry into the ground.
What is old is new. Bring back the S&Ls, set them up as regional groups, and securitize the mortgages via covered bonds. Presto.
Yep. Regional as in State v national charter.
Not as up to snuff on covered bonds as MBS - how fungible is the loan collateral for a covered bond? Is it like and MBS or more like a CDO? If it is more like a CDO and the issuer can replace collateral what kind of say/review do the owners of the bonds have?
Covered bonds are a needed addition to our markets but all of it comes back to FAS 166 &167 - bringing securitized assets back onto balance sheets is THE primary culprit as to why banks will not lend and money velocity is that of a turtle. Clarity on this problem (which is a long ways away as Obama & Co. have requested numerous reports not due for 12-24 months) is the only way the lending markets recover.
As the tsunami sweeps across the flats Bill insists upon a continuance of the age of entitlement in The Hills.
What's this you want to hang the last Bond vigilante? FedTreasury is as close as you can get to a Politburo, without putting on fancy gold hats, and epaulets and making policy by fiat. (never mind the currency) The Banana Republicans, (bipartisan group) have to come down, and PIMCO, GS, and BR are the only guns in town. Accuse THEM of monopoly and what's left??
Well, this explicit backing is a mixed blessing, which is basically what you can say for every extraordinary measure enacted either by the Fed, or Congress to avoid an out and out depression.
Investors demand this guarantee and they have voted with their feet. Every day 100% of GSE MBS (new and secondary) out for bid finds a buyer. Compare this with numbers we see for private label (only secondary right now) MBS (most days ranges from 70-90%).
http://www.empirasign.com/db/lm.php
Now that Agency debt/MBS is backed explicitly by the government, the re-emergence of a new issue private label MBS market has been stymied. When investors are given the choice between ZERO credit risk and any amount of credit risk, they will take ZERO every day. Further exacerbating this crouding out problem is that GSE's can now securitize loans balances up to $730K until September 2011. During the boom, this limit was $417K--leaving a large slice of the market open to private securitizations. In summation, lower home prices + higher GSE limits = no new issue private label market. Perhaps, this is a backhanded way of the Feds punishing some of the bad actors during the boom. (Just my little nod to the conspiracy theorists who hang around here.)
Not sure it follows that the GSE's are crowding out private-label issuance that would otherwise be happening. It's not as if there's activity in other asset classes. TALF gave enough breathing room for issuers to clear their warehouses, but with that prop removed, private activity hasn't come in to fill the vacuum. Those markets are just plain dead.
The rules have changed.
Bernanke and the White House are no longer on the same page.
Bill is sending a message to the WH they'd better deliver on their promises or he's switching sides.
Heres your future view. 1) Fed takes on too many risky assets 2) markets crash in unison marking those assets to market effectively. Fed is broke.. 3) Fed seeks to offload bad debt onto Treasury, and add to deficit 5) Congress finds a backbone and stops the end run.. 6) Fed is broken, Executive branch is smashed (and power grab in place since 1950's is rolled back) Supreme Court takes Libertarian views, Congress reemerges as peoples house. 6) Fed is abolished or has its powers rolled back to 1913... 7) Market sets interest rates, higher to reflect risk, which is only temporary, once markets find equilibrium.. 8) Inflation sweeps the consumer class, buts its only temporary, puts money back into working class pockets, when wages revert to the mean, working class benefits. Small business can make a profit, and borrow money 9) economy recovers.. 10) China and Russia try to emulate American model.
Are ALL your dreams in Technicolor?
(Hope you're right, though)
This would be a given right!! If you had PIMCO managing your money would you want him investing in GSE's without the full faith of the US beind it.......I think not...he's a fiduciary and that's the right move.
I think the elephant in the living room is bond fraud, as is mentioned in Jim Willie's new article, Naked Shorts as Liquidity Machine (http://news.goldseek.com/GoldenJackass/1281556800.php).
In the article, Jim says: "A year ago, vast sums of USTreasury Bonds were the subject of debate and dispute as the volume of Failures to Deliver was staggering in the months following the autumn 2008. Blame was given to the disorder that ensued from the Lehman Brothers failure, the AIG breakdown, and the Fannie Mae nationalization. No such convenient event can be blamed on the present-day Failures to Deliver. They continue for USTreasurys, and explain well the superfluous $1.5 trillion
"What would be the motive for naked short selling of USTreasurys in such volume? Wall Street and the Big US Banks are dead. Imagine a dark storefront that used to have a bustle of business and constant flow of customers. Not Wall Street, no more. The dark storefront conceals a vast counterfeit operation inside. They sell debt securities under the cover of darkness, out the back door, and rake in great sums of money. When demanded to produce the USTreasurys, they refuse, they delay, or they defy, since they cannot deliver. Thus, the Failures to Deliver. This explains the ready cash flow of liquidity to the Wall Street banks without much investment banking business."
Perhaps we can now speculate about the meaning of the incident in which two Japanese nationals were caught with $134 billion in U.S. bonds (http://www.japantoday.com/category/crime/view/2-japanese-carrying-134-bi...). Maybe Japan, one of our biggest creditors, wanted to expose the Treasury bond fraud. Maybe the U.S. Government retaliated by exposing Toyota's problems with its cars.
Toyota is a real problem actually, one I followed since a CHP officer, his wife children and brother in law died in a run-away Lexus. The man was a safety officer. Of course the problem was not the sticking petal, but the electronics, which were probably made in China. The counterfeit bond story is old, and of course some of these Treasuries on lend, like oil from the SPR? Just a thought.
Well, most of the automakers have problems with their cars. So, I don't think Toyota's sticking gas pedal was anything unusual.
The bond fraud is, however, provable. As Jim Willie says, the numbers just don't add up. And the failures to deliver are glaring evidence of fraud.
Also, we've all been witness to the Fed's hidden monetization of U.S. Treasuries through the "household" sector leger entry.
So when has that a$$#o!e NOT ever stopped talking his book, little whining bitch that he is? You can take that stinking, steaming pile of GSE debt and gift wrap it, talk it up, whine and jawbone the Guv that the guarantee had better be good ad infinitum, all the while knowing that the majority of it is about as good as last week's sushi, getting riper by the day. That sushi's for selling, not eating. Trouble is, where do you go with it?
I say we call his bluff!!
The best thing Bernanke could have ever done was to tell Congress to stop the deficit spending or he (Bernanke) will start raising interest rates immediately! I'll bet that would get their attention! They'd impeach him, but not before he would raise interest rates to 9-10%!
DOW and SP500 bearish megaphone wedge charts continue ...
http://stockmarket618.wordpress.com
Market Truth wrote, And if we want to discuss fraudulent accounting, if the government covers Fredd/Fann then it should be part of the U.S. National Debt of course... which it is not.
Without specific and implicit guarantee, it is illegal.
That is a very interesting premise, the legality as well as should it be part of the national debt?
There are 4 levels of "fiscal exposures," that vary from explicit on down to the least level.
Level 1 Explicit Liabilities - Publicly held debt, Military and civilian pension and post-retirement health, Veterans benefits payable, Environmental and disposal liabilities, Loan guarantees.
Level 2 Explicit Financial Commitments - Undelivered orders, Long-term leases
Level 3 - Financial Contingencies - Unadjudicated claims, Pension Benefit Guaranty Corporation, Other national insurance programs, Government corporations, e.g., Ginnie Mae.
Level 4 Exposures implied by current policies or the public's expectations about the role of government - Debt held by government accounts, Future Social Security benefit payments, Future Medicare Part A benefit payments, Future Medicare Part B benefit payments, Future Medicare Part D benefit payments, Life cycle cost, including deferred and future maintenance and operating costs, Government Sponsored Enterprises, e.g., Fannie Mae and Freddie Mac.
From a paper entitled "Federal Debt, Answers to Frequently Asked Questions, An Update," published by the GAO.
This is found in Table 2 on page 66.
Isn't it interesting that Freddie and Fannie are on the lowest level of commitment, along with Social Security and Medicare?
So much for "entitlement" programs.
Seems like the federal government takes its obligations to those 65 and older a bit less seriously than the participants do.
Go to: http://www.gao.gov/new.items/d04485sp.pdf.
Don Levit
an era of scumbags and scoundrels