Nov. 14 (Bloomberg) -- Bill Gross, manager of the world's biggest bond fund, said the debt of consumer-finance companies is attractive after Treasury Secretary Henry Paulson announced plans to use the second half of the $700 billion financial rescue program to help relieve pressures on consumer credit.

``American Express has been potentially admitted to the club in terms of capital injections,'' Pacific Investment Management Co.'s Gross said in a Bloomberg Television interview. ``These are excellent investments based on their associations with the government either through the FDIC guarantees or through the TARP program, and that's where I think an investor wants to go.''

Paulson, who shifted his focus on Nov. 12, initially sold the Troubled Asset Relief Program as a way to rid bank balance sheets of illiquid mortgage assets. American Express won Federal Reserve approval on Nov. 10 to become a commercial bank, which may help the New York-based company expand funding from consumer deposits and get access to the Treasury's bank rescue program. American Express has dropped 61 percent this year as more consumers fell behind on payments and doubt was raised about its own access to credit.

Yields on bonds backed by auto loans and credit-card debt stayed at record highs relative to benchmark interest rates. The gap, or spread, on top-rated credit card bonds maturing in three years remained at 525 basis points more than the London interbank offered rate, or Libor, according to Bank of America Corp. data.

Total Return Fund

Gross has recommended buying mortgage securities issued by government-sponsored enterprises such as Fannie Mae and Freddie Mac, and the debt of banks that have sold stakes to the U.S. government. He advised against buying Treasuries, which his Total Return Fund has not held since December.

``If the Treasury is willing to partner with these institutions, why should we not be willing to join them, especially when we're getting yields higher than the Treasury is getting?'' Gross said today. ``That's a partnership that we think makes a lot of sense.''

Gross's Total Return Fund lost 2.1 percent in the three months through Sept. 30, compared with a 0.49 percent slump by the benchmark it uses to measure performance, according to Pimco's Web site. Mortgage securities and investment-grade corporate debt accounted for 93 percent of its holdings.

`Implicitly Guaranteed'

Freddie posted a record quarterly loss today and asked the Treasury for $13.8 billion to bolster the company's net worth. Paulson said Nov. 12 that Fannie and Freddie need to be restructured by Congress, and federal support for the mortgage- finance companies should either be ``explicit or non-existent.''

``This is, if not an explicitly, then an implicitly guaranteed type of entity, both Freddie and Fannie, and to the extent that they require capital to meet those minimum requirements, they'll get it,'' Gross said. ``This is not a situation where any creditor really has anything to fear.''

Pimco, a unit of Munich-based Allianz SE, has about $790 billion in assets under management.

To contact the reporters on this story: Kathleen Hays in New York at khays4@bloomberg.net; Michael J. Moore in New York at mmoore55@bloomberg.net.

Last Updated: November 14, 2008 15:56 EST