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Pimco COO Doug Hodge argues we are in for a slow period of balance sheet rehabilitation.
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On that later on on markets now well coming up now with nearly two trillion dollars under asset management -- -- Has become one of the most important voices for investors I had a chance to sit down -- chief operating officer Doug Hodge for an exclusive interview.
And I asked him how is Wall Street -- government regulation and profits are profits more important.
Here's how he responded.
How much should I would agree with that -- I think that if indeed we are serving client needs.
Then and we grow the size of the pie.
So it -- The -- of the financial services industry -- to serve as an intermediary.
It's to move risk capital from those who have it to those that needed and in that process we earned him.
We -- if we earn a spread we earn a commission we -- feet and that's that's really -- that the root of what we do.
If your bank obviously there's like -- to different business you're in the business of lending and you -- in ways that are.
Responsible.
And you manage your balance sheet in ways that are responsible.
And again we kinda lost our way.
So I think there're there are -- to both.
Reconcile.
They need to to produce profits as well served his clients the big event that life before -- fiscal cliff.
And if -- just simply lists all of the different.
And he's in the legislation that will roll off.
That accounts for about 720 billion dollars of spending for half percent of GDP.
No one believes that that's what's gonna happen they'll be some negotiated settlement.
Whether it's Republicans Democrats.
We've done the analysis our estimates and I think they are basically consensus.
We're looking at about 250 billion dollars of fiscal tightening.
Which is about one half percentage GDP.
Which is given the context where we are where -- where the economy's growing it.
One and a half to 2% we're we're back to something that feels like recessionary.
Conditions.
What we've learned though is it monetary policy alone.
It's necessary but it's not sufficient and that's why -- in the third round of quantitative easing -- we're in for -- slow period of balance sheet really rehabilitation.
And it this is gonna take years there's no simple way out.
We need a couple of things we need policy that -- in some of the spending in the deficits.
That.
Delivers consistent revenues.
And that promotes growth.
And were suffering on all three right now.
And he also says of Wall Street is again together Dodd Frank's gonna look like a warm up to the next -- regulation our thanks of course to Doug Hodge.
Pimco chief operating officer.
