Mike Konczal discusses Magnetar on Bloggingheads
Roosevelt Institute Fellow Michael Konczal discusses the hedge fund Magnetar with Jesse Eisinger of ProPublica.
Jesse Eisinger was one of the two co-writers of the excellent ProPublica story on Magnetar, the hedge fund that helped keep the housing bubble alive in 2006 and 2007 by betting against it. This story became a must-listen The American Life episode on the subject. The story of Magnetar was also broken by Yves Smith in her book Econned.
Magnetar was able to keep the housing bubble going while profiting off its collapse. It exploited conflicts of interests in the investment community and the opacity of both the securitization market and the CDS derivative market. This story should challenge the knee-jerk assumption that markets will always get it right, regardless of asymmetric information, unequal access to information and outright exploitation.