How's this for bullishness on banks? PIMCO has set up an investment fund to buy distressed banks. The $2.3 billion fund has already set its sights on a deal.

According to Reuters, the Federal Reserve Bank of Richmond is reviewing an application for a company run by the PIMCO Bravo Fund to buy a 20 percent stake in ECB Bancorp. PIMCO has been making a move into assets other than bonds recently. It has pushed hard into equities for example. It has also moved to be more aggressive with its residential REIT.  The idea apparently is to buy more residential mortgages and compete with the big GSEs.

Is this the right time to be targeting banks? Buying low has always been a decent strategy. There are plenty of undervalued banks to choose from, as the economy continues to creak and net interest rates stay low. This is not necessarily a new idea. Not too long ago, private equity funds were similarly taken with the idea of investing more in distressed banks. A lot will depend on regulators playing ball with new buyers.

There's been some talk that perhaps PIMCO has some sort of "in" with the regulators, given some of its consulting work in the aftermath of the financial crisis. That's hard to substantiate. It's fair to say that private equity firms seeking to buy banks did not always find themselves on hospitable grounds. We'll see if it turns out differently for PIMCO.

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