U.S. government plan to arrest the crisis on Wall Street may be too late to repair the extensive damage suffered by the U.S. economy and financial system, the head of the world's biggest bond fund said on Friday.
The U.S. government is crafting a sweeping bailout to mop up toxic mortgage debt that will likely cost hundreds of billions of dollars. It also curbed short-selling and guaranteed money-market mutual funds in an effort that sent global stock markets soaring on Friday.
"We need to monitor the design and execution of the policy announcements; and we need to remember that while they will have a highly significant and very broad impact, they may be too late to repair all the damage that has been suffered by the economy and the financial system," Pimco chief executive Mohamed El-Erian told Reuters.
Pimco manages the world's largest bond fund.
U.S. Treasury Secretary Henry Paulson is leading a push for the taxpayer-funded plan to contain the credit crunch as concerns about the stability of the U.S. financial system deepened.
The government also announced steps to shore up money markets as this long-safe corner of financial markets, home to some $3.5 trillion of deposits, was at risk of falling victim to the year-old credit crunch.
"Underlying these policy announcements are three key changes that will play out over a number of weeks. First, a transition from piecemeal measures to a comprehensive package; second, a shift from predominantly domestic measures to implementation in many countries; and third, greater uniformity in the political tone in support of dramatic policy actions," El-Erian said.
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