What Created This Monster?

LIKE Noah building his ark as thunderheads gathered, Bill Gross has spent the last two years anticipating the flood that swamped Bear Stearns about 10 days ago. As manager of the world’s biggest bond fund and custodian of nearly a trillion dollars in assets, Mr. Gross amassed a cash hoard of $50 billion in case trading partners suddenly demanded payment from his firm, Pimco.

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Bizuayehu Tesfaye/Associated Press

Alan Greenspan, the former chairman of the Federal Reserve. He played a pivotal role in the regulation of derivatives products and oversight of the increasingly complex mortgage market.

Librado Romero/The New York Times

Credit derivatives concerned Timothy F. Geithner, president of the New York Federal Reserve.

And every day for the last three weeks he has convened meetings in a war room in Pimco’s headquarters in Newport Beach, Calif., “to make sure the ark doesn’t have any leaks,” Mr. Gross said. “We come in every day at 3:30 a.m. and leave at 6 p.m. I’m not used to setting my alarm for 2:45 a.m., but these are extraordinary times.”

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