Tuesday, October 4, 2016

Lost 9 Billion Dollar in Trade


As explored in Andrew Ross Sorkin's Too Big to Fail, Morgan Stanley received a $9 billion investment from Mitsubishi UFJ in 2008 that kept the firm afloat
“More than any single trader has ever lost in the history of Wall Street,” said Michael Lewis, author of The Big Short, “And no one knows his name.” While you may not have heard of Howard “Howie” Hubler before the financial crisis, it was impossible to avoid his name after he came to embody the financial misdeeds that led to the massive economic crisis of 2008. You may remember the infamous deal brokered in October of that year after Morgan Stanley, reeling under a load of bad bets on credit default swaps, received a $9 billion check — yep, the largest ever written — from Mitsubishi UFJ to keep the firm from failing, an event Andrew Ross Sorkin details in his bestseller Too Big to Fail.
Hubler, who is blamed for the catastrophic losses, was a thriving derivatives trader up until his excruciating blunder. From 2004 to 2006, he placed big bets against the U.S. real estate bubble using credit default swaps — complex financial instruments that pool and repackage risky sub-prime mortgages to sell on to investors. But the economy’s decline happened slower than he expected, and Hubler had to cover his costs by delving even deeper into the CDO business. When the real estate market collapsed in 2008, he was wiped out — nearly taking Morgan Stanley itself with him.

Howard Hubler III, known as Howie Hubler, is an American former Morgan Stanley bond trader who is best known for his role in the single largest trading loss in history.

He made a successful short trade in risky subprime mortgages in the U.S., but to fund his trade he sold insurance on AAA-rated mortgages that market analysts considered less risky, but also turned out to be worthless, resulting in a massive net loss on his trades.

His actions directly resulted in the loss of roughly US$9 billion during the 2007–08 financial crisis.