On the face of it, that will be a challenge because bond-trading firms participate in the market for themselves and clients and often manage their own portfolios of mortgage-backed securities. The value of those holdings will be influenced by the prices set through the government program.
The management firms considered likely to seek a role include Pimco, New York-based BlackRock Inc., and Pasadena-based Western Asset Management, all of which manage fixed-income portfolios worth hundreds of billions, including holdings in mortgage-backed securities.
BlackRock is 49% owned by Merrill Lynch & Co., which is being acquired by Bank of America Corp. Merrill has extensive holdings of mortgage securities, which would arguably rise in value if the government pegged its purchases at a relatively generous price.
On the other hand, Pimco and BlackRock also have programs to acquire distressed securities. That means they might benefit if the Treasury purchased similar assets at the low end of the price scale, which might lower the prices the two firms themselves pay.
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michael.hiltzik@latimes.com
jim.puzzanghera@latimes.com
