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<oembed><version>1.0</version><provider_name>naked capitalism</provider_name><provider_url>https://www.nakedcapitalism.com</provider_url><author_name>Yves Smith</author_name><author_url>https://www.nakedcapitalism.com/author/yves-smith</author_url><title>Magnetar Strikes Again: JP Morgan Negotiating Settlement with SEC on Toxic CDO | naked capitalism</title><type>rich</type><width>600</width><height>338</height><html>&lt;blockquote class="wp-embedded-content" data-secret="sZzNRieGmk"&gt;&lt;a href="https://www.nakedcapitalism.com/2011/04/magnetar-strikes-again-jp-morgan-negotiating-settlement-with-sec-on-toxic-cdo.html"&gt;Magnetar Strikes Again: JP Morgan Negotiating Settlement with SEC on Toxic CDO&lt;/a&gt;&lt;/blockquote&gt;&lt;iframe sandbox="allow-scripts" security="restricted" src="https://www.nakedcapitalism.com/2011/04/magnetar-strikes-again-jp-morgan-negotiating-settlement-with-sec-on-toxic-cdo.html/embed#?secret=sZzNRieGmk" width="600" height="338" title="&#x201C;Magnetar Strikes Again: JP Morgan Negotiating Settlement with SEC on Toxic CDO&#x201D; &#x2014; naked capitalism" data-secret="sZzNRieGmk" frameborder="0" marginwidth="0" marginheight="0" scrolling="no" class="wp-embedded-content"&gt;&lt;/iframe&gt;&lt;script type="text/javascript"&gt;
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</html><description>As longstanding readers of this blog presumably know, we broke the story of Magnetar, a Chicago-based hedge fund. Magnetar was arguably the biggest player in driving toxic subprime demand through its program of creating hybrid CDOs (largely consisting of credit default swaps, but also including cash bonds by design).  Magnetar constructed a strategy that was a trader&#x2019;s wet dream, enabling it to show a thin profit even as it amassed ever larger short bets (the cost of maintaining the position was a vexing problem for all the other shorts, from John Paulson on down) and profit impressively when the market finally imploded. Both market participant estimates and repeated, conservative analyses indicate that Magnetar&#x2019;s CDO program drove the demand for between 35% and 60% of toxic subprime bond demand. And this trade was lauded and copied by proprietary trading desks in 2006.   As a source who worked in the structured credit area of a firm that did Magnetar trades explained in ECONNED:</description></oembed>

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