...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 rest (via). Felix Salmon has more.
What Magnetar did was legal at the time. But there will always be greedy people who don't mind screwing over others, or their own entire country, or the entire world, for short-term personal profit. It's folly – or irresponsibility, or further greed and corruption - not to address this. Our financial system still allows and even encourages a sort of reckless, sociopathic, narcissistic, nihilistic greed. It's not that nobody knew that this mindset was extremely dangerous, but the folks running the show wanted the party to continue. And the global economy tanked as a result. It's the same greed, vanity, corruption, narcissism and recklessness that's interfering with efforts to prevent another collapse and other acts of financial destruction.
This weekend's This American Life episode "Inside Job" covers ProPublica's work. They also commissioned this nifty little song: