The article fails to indicate who underwrote the CDSs for the CDOs that Magnetar created. If the underwriter of the CDSs decided to charge a lot for the underwriting or refused to underwrite the trash, Magnetar would have imploded from the crap they created.
FYI:
The way you bet against a basket of mortgages is to form a CDO of them and then to take out a CDS on the basket as well. The CDS insures against the default. After you have the CDS, you sell off the CDO, retaining the CDS.
