Did Magnetar Catalyze the 2008 Economic Collapse?
I recently heard a fascinating piece on NPR’s This American Life. It was about what caused the financial crisis of 2008 to be the gigantic disaster that it was. The unbelievable part, the whole thing may be the result of a perverse plan by a Chicago hedge fund called Magnetar. It started well before most of us were even aware there was a problem, back in 2005: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.So, rather than the gigantic bubble which burst in 2008, we might have had a more normal recession back in 2005/2006. But hedge funds were making tons of money in t
