SEC Investigating JPM, Magnetar Deal

Tyler Durden's picture Submitted by Tyler Durden on 11/01/2010 13:32 -0500

CDOCollateralized Debt ObligationsJPMorgan ChaseSecurities and Exchange CommissionSubprime Mortgages

ProPublica reports that the Securities and Exchange Commission is investigating whether JPMorgan Chase allowed a hedge fund to improperly select assets for a $1.1 billion deal backed by subprime mortgages, according to people familiar with the probe. Goldman Deja vu. Settlement due next? Or will money diverted from gold shorts to pay for legal fees mean the short squeeze onslaught in paper PM shorts is about to begin? Stay tuned to find out.

From Propublica:

SEC Investigating Deal Between JPMorgan and Hedge Fund Magnetar

The Securities and Exchange Commission is investigating whether JPMorgan Chase allowed a hedge fund to improperly select assets for a $1.1 billion deal backed by subprime mortgages, according to people familiar with the probe.

Called “Squared” and completed in May 2007, the deal was a collateralized debt obligation, or CDO, made up of pieces of other CDOs. The hedge fund, Magnetar Capital, based in Evanston, Ill., purchased the riskiest slice of Squared as part of a strategy to bet against the mortgage market.

As we reported in April [1], together with Chicago Public Radio’s This American Life [2] and NPR’s Planet Money [3], Magnetar often purchased the riskiest portion of CDOs, enabling the banks to complete the deals. Magnetar also frequently bet against those same CDOs, using side bets. Magnetar’s purchases ultimately spawned at least $40 billion worth of risky CDOs in 2006 and 2007.

While Magnetar bought the riskiest slices, the CDOs were created and marketed by investment banks. In the case of Squared, the SEC is examining whether JPMorgan adequately disclosed to the investors it marketed Squared to that Magnetar had a role in picking the securities that went into the deal while also betting against segments of the deal. The 294-page Squared prospectus [4], which was created by JPMorgan, has generic language warning that some investors and the CDO manager might have investments that conflict with the interests of other holders of the CDO. (Read the prospectus [4].)

Read more here.

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by flacon
on Mon, 11/01/2010 – 13:35
#691237

I mustn’t be up on what the “Magnetar Deal” is…

Login or register to post comments by unwashedmass
on Mon, 11/01/2010 – 13:36
#691241

 

it was probably yet another incredibly skanky way to fleece investors…..transfer wealth to jamie.

Login or register to post comments by flacon
on Mon, 11/01/2010 – 13:38
#691253

I see, it’s to do with the mortgage mess. 

Login or register to post comments by orangedrinkandchips
on Mon, 11/01/2010 – 14:03
#691317

Falcon, yes indeed, mortgage mess. It is quite a story. I live near Evanston and read the article in ProPublica.com…or org but it details this Magna-retard story about this adrenaline junkie who started to buy anything with high yeilds and low on the food chain tranches of these mortgages…in 2007! I was in the industry helping these jack-fucks with a gun to my head but 2007 was late in the game. Way late. So, why was he buying all this shit- many people scratched their heads. It turns out he bought all this shit, bet against it, made a fortune going against it, but his “investment” went south. It was worth $982MM but he sold it to the last bag holder around…Mizuho Bank of Japan. He sold it for 500MM….1/2 price! yah! but 9 months later they write it all off as a bad bad bad investment. Meanwhile, magnatard(that is astronomy term for the last seconds of a dying star) but they made out well….selling the low level junk to Mizuho before they write it totally off…what marooons! ah-ha!

 

look it up on propublica…they lay it out beautifully.

 

 

Login or register to post comments by flacon
on Mon, 11/01/2010 – 16:07
#691637

Thank you. The entire system is riddled with maggots. 

Login or register to post comments by ZackAttack
on Mon, 11/01/2010 – 13:37
#691247

Jeesh, it’s the guy with the dorky helmet in X-Men. Do I have to explain everything around here?

Login or register to post comments by chrisd
on Mon, 11/01/2010 – 13:38
#691256

CDO deal in which Magnetar (a hedge fund) agreed to buy the equity in the deal if other banks would sell the higher rated tranches. Magnetar then bought CDS protection against their equity and made multiples on the CDS compared to what they put in to purchase the equity.

Many feel that the deal would not have happened unless Magnetar structured and agreed to purchase the deal. Effectively, it helped make the crisis worse.

Login or register to post comments by chet
on Mon, 11/01/2010 – 13:46
#691284

Check out propublica’s article and the accompanying NPR story.  They covered it very nicely.  A handful of journalists doing what the supposed experts at SEC can’t.

Login or register to post comments by spekulatn
on Mon, 11/01/2010 – 14:14
#691342

Check out propublica’s article and the accompanying NPR story.  They covered it very nicely.  A handful of journalists doing what the supposed experts at SEC can’t.

 

Propubicla is funded by who?  

NPR is a joke.

Both be elitist propaganda machines. 

Nuff said.

Login or register to post comments by chet
on Mon, 11/01/2010 – 14:24
#691370

I understand what they’re biases are.  Still excellent work on Magnatar.

Login or register to post comments by sethco
on Mon, 11/01/2010 – 13:51
#691292

listen to the “This American Life” story on it. Lengthy but entertaining piece. (link above)

Login or register to post comments by Bigger Dickus
on Mon, 11/01/2010 – 13:36
#691238

At this point only suckers have any money with JPM and Wells Fargo (and all others to a lesser extent).

Those who lose their savings whenever a bank collapses get hat they deserve. Yes, even 85-year old grandmas. We shouldn’t feel sorry for the sheeple.

Login or register to post comments by SheepDog-One
on Mon, 11/01/2010 – 13:37
#691246

YEP! No mercy for the fukin sheeple for whats comin to them soon, NONE!

Login or register to post comments by unwashedmass
on Mon, 11/01/2010 – 13:35
#691240

and the hits just keep on comin’

 

 

Login or register to post comments by SheepDog-One
on Mon, 11/01/2010 – 13:36
#691242

What did JPM do, hack the SEC’s porno account or somethin??

Login or register to post comments by Cognitive Dissonance
on Mon, 11/01/2010 – 13:39
#691257

Nope.

JPM responded to a request for documents by actually sending some documents to the SEC, forcing the porno addicted SEC idiot savants to actually do some work.

This lawsuit will teach JPM that is doesn’t pay to play by the rules.

Login or register to post comments by Miss Expectations
on Mon, 11/01/2010 – 15:18
#691513

Maybe, just this once, those porno addicted SEC idiot savants will take those guns out of their pants and hold them to the banker’s heads for a change.  Now, that’s change I can…oh, never mind.

Login or register to post comments by Cognitive Dissonance
on Mon, 11/01/2010 – 15:34
#691555

Actually it’s the other way around. Those bankers are holding their “guns” to the heads of the SEC staffers. More specifically, the banker’s “guns” are being held near the mouth area of the SEC staffers.

Polly want a cracker?

Login or register to post comments by Miss Expectations
on Mon, 11/01/2010 – 15:37
#691570

BSD’s?  I am forced to conclude that sec “members” are small.

Login or register to post comments by johngaltfla
on Mon, 11/01/2010 – 13:36
#691245

Of course. Then again everyone who did not give until it hurts to the incumbents will be investigated now.

They’ll settle, fees will go up on checking, and the SEC gets another $100 million trophy press conference. That should be good for S&P 1350.

Login or register to post comments by Steak
on Mon, 11/01/2010 – 13:39
#691261

aww cute, the kids at the SEC are out playing detective again.  i just don’t have the heart to tell them its all make believe and they can’t actually convict anybody of anything.  hopefully they won’t stay out too late playing, this porn isn’t gonna watch itself.

Login or register to post comments by schoolsout
on Mon, 11/01/2010 – 13:59
#691310

those meddling kids!

Login or register to post comments by Cognitive Dissonance
on Mon, 11/01/2010 – 14:04
#691318

hopefully they won’t stay out too late playing, this porn isn’t gonna watch itself.

I heard that various SEC staffers attended the staff Halloween party dressed up as……yup, what else but trannies. Stick with what you know, right?

Login or register to post comments by jtmo3
on Mon, 11/01/2010 – 13:40
#691270

Quick answer…YES!

Login or register to post comments by ZeroPower
on Mon, 11/01/2010 – 13:42
#691273

Repeat of Goldman w/ ABACUS. What will happen? Nothing (major).

Oh well, nice try defenders of what is right. Try again next time :/

Login or register to post comments by SheepDog-One
on Mon, 11/01/2010 – 13:43
#691278

And finally, the markets roll over to red….bravo, idiot pumpmonkeys!

Login or register to post comments by Bill Lumbergh
on Mon, 11/01/2010 – 13:44
#691279

What happened…the 3 indices are red now by 0.05%…this was not part of the arrangement.

Login or register to post comments by SheepDog-One
on Mon, 11/01/2010 – 13:46
#691285

Shocking…they had the election eve 100 point DOW pump all set and stabilized, until everything suddenly rolled over red. This crap is going to get nuked from orbit soon.

Login or register to post comments by Bill Lumbergh
on Mon, 11/01/2010 – 13:51
#691294

One can only hope…this levitating act is getting old.

Login or register to post comments by SheepDog-One
on Mon, 11/01/2010 – 14:16
#691351

Mmmmm yeaaaaaaaaaaa…

Login or register to post comments by RockyRacoon
on Mon, 11/01/2010 – 14:37
#691397

Somebody has the pre-announcement info and the movement this afternoon and overnight will tell the tale.   Same old story.

Login or register to post comments by Financial_Guard…
on Mon, 11/01/2010 – 14:44
#691422

LOL Yeaaa, I’m gunna’ need you to come in on Saturday…

Login or register to post comments by Shameful
on Mon, 11/01/2010 – 13:45
#691282

Wow I thought this was already slipped under the rug. So how much will JPM have to kick up to make this go away? SEC must need more money to get more porn.

Login or register to post comments by the not so migh…
on Mon, 11/01/2010 – 13:50
#691291

Isn’t Magnetar a Rahm Emaunel shin dig.

Login or register to post comments by JonNadler
on Mon, 11/01/2010 – 13:55
#691304

oooooohhhhh, Jamie must be shaking, oh yeah

Login or register to post comments by SheepDog-One
on Mon, 11/01/2010 – 14:20
#691361

Jamie needs to wear Depends daily over his silver shorts.

Login or register to post comments by williambanzai7
on Mon, 11/01/2010 – 13:57
#691306

MT

Login or register to post comments by Joe Davola
on Mon, 11/01/2010 – 14:02
#691312

Fraud can score some pretty nice digs:

 

http://www.chicagohomemag.com/Chicago-Home/September-October-2008/Well-M…

Login or register to post comments by RockyRacoon
on Mon, 11/01/2010 – 14:42
#691415

JFC….  Check out the photo gallery:

http://www.chicagohomemag.com/Chicago-Home/September-October-2008/Well-M…

Login or register to post comments by buzzsaw99
on Mon, 11/01/2010 – 14:03
#691315

Fraud isn’t illegal when JPM does it. Ask Jefferson County.

Login or register to post comments by Problem Is
on Mon, 11/01/2010 – 14:51
#691440

Got reamed on that sewer deal…

Sam Spade to Joel Cairo:
“When you’re slapped, you’ll take it and like it…”

Login or register to post comments by John McCloy
on Mon, 11/01/2010 – 14:05
#691320

The PDS are about to setoff some financial nukes in the indecies
in the next hour to flex some muscle and show they do not like disturbance in the force

Login or register to post comments by buzzsaw99
on Mon, 11/01/2010 – 14:16
#691349

I sure hope bernanke pays up the extortion money on time. [/sarcasm]

Login or register to post comments by TooBearish
on Mon, 11/01/2010 – 14:06
#691324

Some bag on CNBS reporting inflows into stocks about to piss himself

Login or register to post comments by Rick64
on Mon, 11/01/2010 – 14:12
#691334

 Do I detect a pattern? Blatant fraud and of course a fine then it all goes away. Election bullshit to make it look like Obama is getting tough on wallstreet.

Login or register to post comments by SheepDog-One
on Mon, 11/01/2010 – 14:19
#691359

LOL, Obama can dream on, his credibility is in the shitter I dont care if he personally delivered gold coins to all americans the ‘election hype’ is over and baked into 1,300 DOW points since Sept and its only pissed people off more. 

Login or register to post comments by poggi
on Mon, 11/01/2010 – 14:24
#691372

Using these dramatic waterfall charts when the “fall” represents 1% of the share value is not warranted.

Login or register to post comments by Waterfallsparkles
on Mon, 11/01/2010 – 14:27
#691377

Will JPM Crash the Market on this Probe?  They are too Big to Fail. What is wrong with those SEC chumps anyway?

Login or register to post comments by OutLookingIn
on Mon, 11/01/2010 – 14:27
#691384

Bad car loans, credit card arrears, defaulted REFIs, soured mortgages, yes, even muni tax defaults – mix well – package in Credit Default Obligors, Mix with other various debt instruments of dubious value and call them Collateralized Debt Obligations (CDOs), mix well with other CDOs, segregate by “slice  & dice” and ‘sell’ the ‘new’ packages of CDOs to the unwary, except the worst of the worst in which ‘Magnetar’ (an empty front) assumes ownership and promptly bets that they fail! Load. Mix. Wash, rinse, repeat… Laugh all the way to Georgetown, Grand Cayman. Kick back and relax.

Login or register to post comments by RobotTrader
on Mon, 11/01/2010 – 14:40
#691411

Login or register to post comments by Problem Is
on Mon, 11/01/2010 – 14:48
#691426

JPMs Teflon Fraudster Man
Jaime D settles for $200 million of stock holder’s money and admits no wrong doing…

Except for the parts he sub contracted to Lloyd… “Shit is now stickin’ to you Lloyd…”

Jamie Says: “Nothin’ to see here, rabble, saps and suckers… As your new Secretary of the US Treasury… move along…”

Login or register to post comments by Joe Davola
on Mon, 11/01/2010 – 15:01
#691480

I’m sure those contributions to Rahm haven’t gone un-rewarded.

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