Tuesday afternoon, in Day Two of the Senate standoff over financial reform, Senate Banking Chairman Chris Dodd was in the middle of a speech about Goldman Sachs, its bets against the mortgage market, and the need for financial reform...
Earlier this month National Public Radio and the nonprofit journalistic organization ProPublica reported on another firm, a hedge fund named Magnetar. This hedge fund ... saw the housing market begin to decline in the year 2005, bought up enormous amount of doomed bonds composed of bad mortages, thus keeping the market artificially inflated, and then made huge bets on the failure of the very bonds they had bought, knowing how worthless they were. Thanks to this scheme, the housing bubble grew bigger and collapsed harder. Magnetar walked away with billions of dollars in profits. Other institutions saw an opportunity to run the same scheme. The American people ended up paying the price, of course, as we all painfully are aware.
"The problem isn't that these executives got rich without contributing to America," Dodd added. The problem "is these executives got rich betting against America. They did it in secret, where no one could see what they were doing, let alone stop them until it was too late."
Update Apr. 28: An embedded version of the video is now available: