Monday, April 12, 2010

Magnetar: Inside Job

background: At just the moment that U.S. housing market seemed to be slowing in late 2005, a few savvy financial engineers at a suburban Chicago hedge fund helped revive the Wall Street money machine, spawning billions of dollars of securities ultimately backed by home mortgages. When the crash came, nearly all of these securities became worthless, a loss of an estimated $40 billion paid by investors, the investment banks who helped bring them into the world, and, eventually, American taxpayers. Yet the hedge fund, named Magnetar for the super-magnetic field created by the last moments of a dying star, earned outsized returns in the year the financial crisis began. How Magnetar pulled this off is one of the untold stories of the meltdown.

read the entire article: The Magnetar Trade: How One Hedge Fund Helped Keep the Bubble Going

the following is from: This American Life

Prologue.

Ira talks about a friend who for years had a very trusted business partner and bookkeeper, until one day when he ran away with all of her money. (1 1/2 minutes)

Act One. Eat My Shorts.

A hedge fund named Magnetar comes up with an elaborate plan to make money. It sponsors the creation of complicated and ultimately toxic financial securities... while at the same time betting against the very securities it helped create. Planet Money's Alex Blumberg teams up with two investigative reporters from ProPublica, Jake Bernstein and Jesse Eisinger, to tell the story. Jake and Jesse pored through thousands of pages of documents and interviewed dozens of Wall Street Insiders. We bring you the result: a tale of intrigue and questionable behavior, which parallels quite closely the plot of a Mel Brooks musical. (40 minutes)

We commissioned a Broadway song to go along with this story, which you can listen to here. (Click to stream; right click or control click to download.)

You can also download the sheet music.

And here is a video of the recording session for the song:

Bet Against the American Dream from Alexander Hotz on Vimeo.

Act Two. Taking a Big Pink Eraser to the Thin Blue Line

Michael May tells the story of Barry Cooper, a former crooked narcotics cop who has turned his interest elsewhere... to busting crooked narcotics cops. But after Cooper and a rich benefactor team up to set a trap for the police, Barry's plans are put in jeopardy- including his dream of creating a reality show called "Kop Busters." Michael May is the Culture editor at the Texas Observer. You can watch videos of Barry's police raids at their website. (15 minutes)

Song: "Good Guys and Bad Guys", Camper Van Beethoven

from: This American Life

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