Magnetar Hedge Fund: Did It Hasten the Housing Fall?

magnetar hedge fund; CDOs; CDSs
magnetar hedge fund; CDOs; CDSs

Is it possible that the biggest institutions on Wall Street shorted the U.S. housing market, causing it and the global economy to melt down in orders of magnitude larger than what could have been? It appears to be so....

A magnetar, by definition, sucks everything in and spits even more out. The Chicago-based hedge fund Magnetar Capital did the same thing with the financial instruments that powered the housing/refi boom -- Collateralized Debt Obligations (CDO) and Credit Default Swaps (CDS) -- to a rather sinister degree, creating an investment strategy called the Magnetar Trade.

Late in 2005, it appeared the appetite for subprime mortgages had ceased, as defaults rolled in and the crap subsequently trickled downstream into investor portfolios. In the same year a hedge fund by the name of Magnetar opened its doors with a huge appetite for these mortgages (and the securities they were traded within) that most institutions already considered extremely toxic. And Magnetar was willing to take the worst positions in the security, agreeing to be paid last in the profit stream.


Why?