Banks’ Plan to Help May Itself Need Help

Does the rescue plan for the credit markets need to be saved?

The plan is still being developed, but the roughly $75 billion effort to snap up troubled securities is struggling to get off the ground, days after it was disclosed by the country’s three biggest banks with the support of the Treasury Department................

"This is just taking money from one pocket and putting it another, with admittedly slightly stronger credit backing," said William H. Gross, the chief investment officer of Pimco, the huge bond manager.

Mr. Gross, whose firm manages about $700 billion in assets but does not hold asset-backed commercial paper issued by S.I.V.’s, said the situation reminded him of Japanese banks that refused to sell or write off troubled loans at distressed prices in the 1990s. Then, United States Treasury officials advised their counterparts in Japan to move swiftly to clear their portfolios of problem debts. Today, Treasury officials are doing the opposite, he added.

"They are refusing to liquidate assets at market levels, so the problem continues," Mr. Gross said in a telephone interview yesterday. "Let’s get this stuff out in the open and find out what the assets are worth."
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