Where's RICO (TRUTHOUT)
EXCERPT:
One week before the SEC action against GS, the Pro Publica web site published a story about virtually the same kind of mischief being run out of the Chicago-based hedge fund Magnetar led by a clever young fellow named Alec Litowitz. Like GS, Magnetar deliberately constructed investments (bundles of bundled mortgage-backed securities called collateralized debt obligations or CDOs) that were certain to fail, so that Magnetar could collect on credit default swaps that amounted to a bet against products they themselves had participated in creating. There was no question that Litowitz and his employees did this absolutely on purpose. Nor is there any question that they aggressively sold positions in these CDOs to credulous investors like Thrivent Financial for Lutherans and others.

Rahm Emanuel and Magnetar Capital the definition of comprimised
EXCERPT:
But the sponsors of this toxic trade did bother to make sure they had a powerful friend. The head of the firm in question gave substantial amounts of money by political contribution standards to Rahm Emanuel’s PACs, and only his PACs, over the period when these transactions were in play.

The moving force behind a brilliant and devastating subprime short strategy was a heretofore unknown Chicago hedge fund, Magnetar, headed by Alec Litowitz, formerly of the hedge fund behemoth Citadel. Our studies indicate that Magnetar alone accounted for between 35% and 60% of demand for subprime mortgages in the year 2006.

Magnetar and Goldman defend their CDO bets
EXCERPT:
By Michael Corkery
CDOs everywhere are under attack.

This week the CDO spotlight is shining on Goldman Sachs Group over the brokering and marketing of the 2007 Abacus transaction that is the subject of the SEC’s civil suit against the investment bank. But a few weeks ago, it was hedge fund Magnetar Capital that was under the microscope of ProPublica, an online news site that chronicled how the secretive hedge fund firm reaped a fortune from trades associated with CDOs that failed soon after Magnetar helped create them.

Book on Marc Rich Details His Iran Oil Deals
EXCERPT:
Book on Marc Rich Details His Iran Oil Deals

Published: October 15, 2009
Marc Rich, the former fugitive oil trader long criticized for his business ties to nations like Iran, South Africa and Cuba, has acknowledged in a new book that his dealings with those nations were more extensive than previously disclosed.

Marc Rich and Rahm Emanuel
EXCERPT:
Some of the supposedly "segregated accounts" have been unlawfully commingled with clandestine funds of the Russian mafiya with the connivance of Marc Rich and his mob; and interwoven with the funds of the Red Chinese Secret Police, with the reported complicity of not only Marc Rich but his accomplice, Rahm Emanuel, former Clinton White House Senior Advisor, and more currently, Managing Director of Wasserstein Perella & Co., reputed Asian money laundry front. Rahm is the reputed Deputy Chief of Israeli Intelligence, The Mossad, for North America.

Marc Rich and Rahm Emanuel mentioned together again
EXCERPT:
Questions, of which in our various website series we have made partial answers

Q- How many foreign and domestic political assassinations has Marc Rich reportedly arranged and financed, disguised as metals and grain deals? See some of the details previously posted about Rahm Emanuel, the Chicago Mercantile Exchange, and the Chicago Board of Trade dirty business. Are these events occurring through the aid of Rahm Emanuel, managing director of Wasserstein Perella & Co.? We think so. And Rahm is reportedly linked to Marc Rich and the Red Chinese Secret Police operating IN THE UNITED STATES.

"Pro Publica's New investigative report Release on Hedge Fund Magnetar and how they GAMED the SYSTEM as HEDGE FUND involved in the Meltdown

Yves (from Website "Naked Capitalism") has a whole chapter on Magnetar in her terrific book, ECONned. Here's what Magnetar was all about, via Pro Publica:

In late 2005, the booming U.S. housing market seemed to be slowing. The Federal Reserve had begun raising interest rates. Subprime mortgage company shares were falling. Investors began to balk at buying complex mortgage securities. The housing bubble, which had propelled a historic growth in home prices, seemed poised to deflate. And if it had, the great financial crisis of 2008, which produced the Great Recession of 2008-09, might have come sooner and been less severe.

At just that moment, a few savvy financial engineers at a suburban Chicago hedge fund <1> <1> 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. Only a small group of Wall Street insiders was privy to what became known as the Magnetar Trade. Nearly all of those approached by ProPublica declined to talk on the record, fearing their careers would be hurt if they spoke publicly. But interviews with participants, e-mails, thousands of pages of documents and details about the securities that until now have not been publicly disclosed shed light on an arcane, secretive corner of Wall Street.

According to bankers and others involved, the Magnetar Trade worked this way: The hedge fund bought the riskiest portion of a kind of securities known as collateralized debt obligations -- CDOs. If housing prices kept rising, this would provide a solid return for many years. But that's not what hedge funds are after. They want outsized gains, the sooner the better, and Magnetar set itself up for a huge win: It placed bets that portions of its own deals would fail.

So make a horse-racing analogy: Magnetar formed a syndicate, and got a ton of suckers to bet on a horse they were backing. Then, in secret, they bet against the horse. Bad enough. But it gets worse: They crippled their own horse, to make sure the suckers lost and they won! (And then it gets worse: We taxpayers covered the bets for the suckers...)

Along the way, it did something to enhance the chances of that happening, according to several people with direct knowledge of the deals. They say Magnetar pressed to include riskier assets in their CDOs that would make the investments more vulnerable to failure. ... An independent analysis <9> <9> commissioned by ProPublica shows that these deals defaulted faster and at a higher rate compared to other similar CDOs. According to the analysis, 96 percent of the Magnetar deals were in default by the end of 2008, compared with 68 percent for comparable CDOs.

Yay! Well, who owns Magnetar? A hedgie from Chicago named Alec Litowitz. And which party does our Alec contribute to? You'll never guess:

The Democrats, including Rahm Emmanuel.

Oddly, or not, a story from Daily Finance by Moe Tkacik that covers this story -- Rahm Emanuel and Magnetar Capital: A Love Story -- isn't available any more, not even in Google's cache. Traces of it do, however, still exist at Hedgehogs, Yahoo, and Bing. Tkacik is for real (see, e.g., Felix Salmon) so what happened to her story?

Magnetar CEO Alec Litowitz: Proud Democrat
Sun, 04/11/2010 - 1:05pm —