Bill Gross, a managing director at Pacific Investment Management Co., called the housing bill making its way through Congress "the best way to begin the long journey back to normalcy" in the mortgage market.

In a posting Thursday on the Newport Beach, Calif., bond fund management company's Web site, Mr. Gross wrote that despite repeated cuts to the federal funds rate, the price of mortgage credit is going up, and the bill is the only way to get rates back down.

Rising mortgage rates are preventing a recovery in home prices and threatening the health of financial institutions that have made big bets on the housing market, he wrote. Until home prices show signs of turning around, he wrote, "Investors should remain in high quality assets."

The comments followed a weeklong rally in financial stocks fueled in part by expectations the mortgage mess is starting to bottom out.

But Pimco estimates that $5 trillion of mortgage loans are in risky categories and expects $1 trillion worth of ultimate losses. In mid-July analysts at Goldman Sachs put writedowns by global financial companies at just shy of $350 billion.

Mr. Gross wrote that if institutions cannot raise capital to offset the losses, they will have to cut back credit and sell assets, worsening the pressure on prices.

The bill, which the House passed Wednesday, includes a provision to provide "rescue" funds for Fannie Mae and Freddie Mac. Investors are concerned the government-sponsored enterprises might lack the capital to offset losses on their huge portfolios of loans, bonds, and guarantees. Mr. Gross pointed to a Congressional Budget Office conclusion July 22 that the GSEs are "barely solvent" when their assets are valued at current market prices.

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