We recently reported on JP Morgan's ongoing attempts to negotiate a SEC settlement of its notorious Squared CDOs caper, in which it marketed securities at Magnetar's behest while Magnetar was simultaneously shorting them. Now, the Pulitzer Prize has been awarded to ProPublica for a series of articles that made the intricacies of the story accessible to just about any reader.
Reporters Jesse Eisinger and Jake Bernstein won the coveted yearly award for what the Pulitzer Prize committee called:
"…questionable practices on Wall Street that contributed to the nation's economic meltdown, using digital tools to help explain the complex subject to lay readers."
Magnetar was a central player in the series that featured cartoons and graphics to help explain the complex world of Collateralized Debt Obligations. The SEC is investigating JPMorgan Chase over its role in marketing these turkeys at Magnetar's behest. For the record, Magnetar has yet to be charged with any wrongdoing. Magnetar has informed ProPublica last year that it "did not at any time require or expect any specific assets to be purchased into the Squared."
Magnetar purchased the riskiest portions of various CDO securities, allowing banks to synthesize an offering, termed Squared. The case parallels last year's case, in which Goldman Sachs reached a settlement with the SEC over a similar issue. There, the charge was that Goldman was structuring and marketing CDOs recommended to Goldman by the Paulson & Co hedge fund, even as Paulson was shorting those same CDOs. The settlement cost Goldman $550 million. The charges were that the CDOs were dogs and that Goldman was shafting its customers as it and Paulson profited on the loser CDOs.
"This is the kind of thing that the mainstream media's doing less and less of," Eisinger told the Associated Press. "We're deeply grateful that it's being recognized."
© 2011 Hedge Fund Writer LLC
