Bill Gross, widely considered the king of the American bond market, says a Federal Reserve rate cut won’t solve mounting mortgage problems. Instead, the billionaire credit-markets guru is asking President George Bush to step in and bail out homeowners who can’t pay their bills.

The call comes as Wall Street clamors for the Federal Reserve to cut its federal fund target rate to minimize the fallout from mortgage defaults. Gross says, however, that even a steep rate cut wouldn’t necessarily fix the mess because it wouldn’t halt upward adjustments on adjustable rate mortgages.

Many homebuyers took out adjustable-rate mortgages to take advantage of low interest payments for the first two or three years. When their rates reset higher after the initial period, the homebuyers couldn’t handle the bigger bills.

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http://www.forbes.com/2007/08/23/gross-mortgages-bush-markets-bonds-cx_af_0823markets19.html?feed=rss_news