Occasional blogging, mostly of the long-form variety.

Saturday, April 10, 2010

Bet Against the American Dream

Ever hear about a company named Magnetar? No? ProPublica has a good piece on their role in the financial collapse:

...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:

Bet Against the American Dream from Alexander Hotz on Vimeo.



libhom said...

This is an example of why we need much stronger financial regulation in this country. We need to undue Bill Clinton's deregulation and then add an entire new layer of restrictions to protect the general public from wealthy speculators.

aimai said...

I heard that piece. It was stunning. As good as the piece they did a few years ago explaining the housing bust.