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"This American Life", CDOs, and the Magnetar trade

Another in a long line of superb stories covering the origins and the originators of the U.S. financial debacle was presented on the National Public Radio show, "This American Life", hosted by Ira Glass, this morning (April 10). The focus of this collaboration between the show and the online investigative journalism site, "ProPublica", was a Chicago hedge fund named Magnetar, which began actively creating and purchasing the riskiest tier of collateralized debt obligations (aka, CDOs) in spring 2006 to the tune of tens of billions of dollars at the very moment the air was beginning to leak from the CDO and housing bubble. Concomitantly, while Magnetar was helping keep the bubble afloat, it is alleged to have made vastly larger bets against those very same CDOs via credit default swaps, for which they ultimately vastly profited. The story provides additional insight into the roles the mega-banks played in these enterprises, and the enormous fees individuals at those banks collected, regardless of the financial viability of the investments they were funneling on to others. This story provides a timely counterpoint to former Citigroup CEO Charles Prince's recent (April 8) disingenuous 'non est mea culpa' before a congressional panel. So, for those interested in tales of the few who found a way to profit from the fall, such as those featured in the fascinating new Michael Lewis book, "The Big Short", while at the same time disgusted by the pervasive arrogance, greed, and lack of accountability still present in the system, this is a must read/listen. Both the article and the radio show can be accessed from the link below:

Disclosure: I have no affiliation with either ProPublica, This American Life, or National Public Radio.