Bond Manager Says Don't Bail Out Subprime

Bill Gross, the Pimco bond guru, is like the old E.F. Hutton: When he talks, people listen.

The question right now is whether his words always match his reputation.

Last week, Gross grabbed the headlines by warning that the housing slump could lead to devastating economic consequences. He argued that a 10% fall in prices nationwide could set off price deflation of a kind not seen since the Great Depression, while waves of mortgage defaults could undermine confidence in the financial system here and abroad.

Gross concluded by urging President Bush to launch an emergency, New Deal-style federal bailout of distressed homeowners to forestall disaster. ...