More On The Hedge Fund That Bet Against The American Dream

[deminks]

http://www.npr.org/blogs/money/2011/01/27/133280720/more-on-the-hedge-fund-that-bet-against-the-american-dream

Full Story:

http://www.propublica.org/article/new-documents-show-hedge-fund-magnetar-influenced-deal-despite-denials

A Financial Crisis Inquiry Commission document shows <2> the hedge fund Magnetar selected hundreds of millions of dollars' worth of assets that went into a billion dollar Merrill Lynch mortgage securities deal, despite having long asserted otherwise.

(snip)

The Financial Crisis Inquiry Commission released its final report <7> today on the causes of the financial and economic crisis in the United States. The report quotes from a letter in a lawsuit that contradicts Magnetar's assertion.

Magnetar used a CDO called Norma to create a $600 million bet against subprime mortgage securities, according to the document. The CDO itself took the other side of the bet, and ultimately cost investors in Norma hundreds of millions of dollars. Merrill Lynch underwrote and marketed the $1.5 billion Norma.

According to the commission report, Magnetar made the selections without the knowledge of the manager legally charged with picking the assets for the CDO or the risk department of the bank that helped create the deal.

(end snip)

And they all got bonuses for their work.

[dkf]

1. So they posed as buyers of the fund and convinced the manager to let them select

Holdings but then they shorted it many times over? Isn't that deceptive? Sounds illegal to me.