Before the Abacus synthetic CDO that led to Goldman Sachs being accused of securities fraud came the CDO deals associated with Magnetar, the Illinois-based hedge fund.
Now Magnetar has come out fighting against accusations from ProPublica, the online news group, that it helped to stoke the US housing bubble in order to short its CDOs with astronomy titles such as Libra and Norma.
With its allegation of securities fraud against Goldman Sachs, the Securities and Exchange Commission has finally taken dead aim at Wall Street’s behaviour in the housing boom.
The controversy over hedge funds shorting synthetic collateralised debt obligations in the late stages of the mania has focussed on Magnetar, the fund I wrote about this week.
My FT column this week is on Magnetar:
Two years after the subprime mortgage lending bubble started to pop with the collapse of Bear Stearns, politicians still want to know who to blame. They are making slow progress.