Bill Gates, Warren Buffett, George Soros and the usual "philanthropist" media darlings have nothing on him

PIMCO's Bill Gross is a mensch:

Richard Green:

At Tuesday's conference on the Future of Housing Finance, Bill Gross suggested that anyone who was current on a Fannie/Freddie loan should automatically be refinanced to the current mortgage interest rate of about 4.5 percent. This should happen instantaneously, without underwriting.

I am trying to see the downside of this. It reduces the probability of default, because it reduces the present value of the loan balance and payments. It only rewards those who pay their mortgages on time. And as Bill Gross pointed out, it would amount to an enormous stimulus (what he didn't point out is that the stimulus would be at least partly funded by foreign holders of MBS*).

(via Mark Thoma)

Ezra Klein points out Gross's idea doesn't need 60 Senate votes and doesn't add to the deficit.

Huffington Post business reporter Shahien Nasiripour writes:

But it's more than just a Wall Street versus Main Street issue. Investors in mortgage-backed securities -- like pension funds, unions and retail investors -- would be hurt by the program. And over the long term, so could homeowners.

Mortgage refinancings involve paying off an old mortgage and taking on a new one with better terms, like a lower rate. Investors who own bonds backed by home loans with 7 percent interest, for example, would essentially lose out on that extra income. Also, wiping out those higher-rate mortgages that back bonds that are trading above par -- meaning their current price is above face value -- would rob investors of that additional gain.

Banks that own those securities would also lose out on that income, as would asset managers and other large investors in mortgage-backed bonds, like the Chinese government, Gross said. Fannie and Freddie, which have tens of billions of dollars in mortgage holdings in their portfolio, would also suffer from that loss of income. PIMCO, too, Gross said.

"At PIMCO, we'd be affected by $3 or $4 billion in terms of a refunding loss," Gross said. "But I'm here as a public advocate, not as a private [investor]. When I go back to Newport I'll be back to managing that portfolio." PIMCO is based in Newport Beach, Calif.

Homeowners could end up losing too, said Joshua Rosner, managing director at independent research consultancy Graham Fisher & Co.

"As a result of another prepayment-shock and the inability to model future prepayment shocks, investors would become even more unwilling to invest in [mortgage-backed securities] going forward, or would begin to demand higher yields going forward," Rosner wrote on the popular finance and economics-focused blog, The Big Picture. The prepayments -- refinancings lead to old mortgages being paid off -- would cost investors "more than half a trillion [dollars] in lost interest income," he wrote.

Tough titties, the economic clitoris need stimulation pronto. STAT!**

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*mortgage-backed securities
**Medical term used to imply urgent or rush. It may appear in lower case letters as stat or in capital letters as STAT, as in "Treatment may include STAT surgery." The term is derived from the Latin word "statim" which means immediately. Oh and btw Mr. Joshua Rosner, wasn't the whole problem that investors were stupid about motgage-backed securities in the first place?