Pimco too powerful?

The influence that’s exerted by the OC-based bond giant – we’re really talking about Pimco’s founder and co-chief investment officer, Bill Gross – is a perennial topic within the financial world. (Gross works with Mohamed El-Erian, who shares the CIO title.) From Fortune:

Peter Cohan, a venture capitalist and management consultant, says he's concerned that Pimco may have too much sway over Washington and be in a position to dictate policy choices that might be good for Pimco but bad for taxpayers. "This is a bilateral monopoly with one big seller and one big buyer," he says. "Gross, a famously good gambler, knows that winning in this type of market means threatening not to buy when the government needs to sell. Gross has the government in a weak negotiating position."

Whatever they’re doing has been quite successful, especially given the market turmoil. Total Return, the firm's flagship mutual fund, earned 4.8 percent in 2008 (the typical intermediate-term bond fund lost 4.7 percent).

With many traditional bond market players - like investment banks, insurers, and pension funds - on the sidelines, Pimco is serving as a buyer of last resort for hedge funds and others seeking to sell bonds to raise cash. "They don't want to, and often can't, sell their bond portfolios in bits and pieces," says El-Erian, "but we are big and liquid enough to buy the entire thing." Pimco also will be among the few institutional investors able to soak up the coming onslaught of Treasuries, as well as mortgage paper backed by Fannie Mae and Freddie Mac, and municipal bonds.

More on Mohamed El-Erian: He'll be in conversation with the LAT's David Lazarus at the L.A. Public Library (Fifth Street branch downtown) tomorrow morning (Breakfast and networking from 7:30-8:15; from: 8:15-9:15). It’s part of the at the Aloud Business Forum series. Event is sold out, but I have a few tickets to give away.