Howie Hubler

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Howard Hubler III
Nationality United States
Occupation Trader, consultant
Known for Trading losses

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 bet against risky subprime mortgages in the U.S. and sold insurance on AAA-rated mortgages that market analysts considered less risky, but also turned out to be worthless.[1][2] His actions directly resulted in the loss of roughly US$9 billion during the 2007-08 financial crisis.[3][4]

Early life and education

Howie Hubler was born and raised in New Jersey, United States. He was the son of a real estate broker. Hubler attended college at Montclair State College, where he played American football.[2]


Coming on board with Morgan Stanley sometime in the late 1990s, Hubler worked in Morgan Stanley's Fixed Income division as a bond trader. Among his peers, he had a reputation as a hothead and a bully who responded to critiques with strong anger. In 2003, Morgan Stanley created a proprietary credit default swap (CDS) for the purpose of betting against bad subprime mortgage bonds. When a group was being formed in 2003 to bet against subprime mortgages, Hubler co-opted management of the group and was placed in charge of the team. After being met with early successes betting against subprime mortgage bonds as well as doing well selling bonds, Hubler was promoted to run the newly created Global Proprietary Credit Group (GPCG) in 2006.[2]

9 billion-dollar loss

The GPCG had positioned itself within Morgan Stanley as a group that would provide highly profitable deals very quickly. Because of the nature of the credit default swaps, however, the GPCG was required to post premiums to their counter-parties until such a time in which the bonds were considered to be in default. Because the group was paying out a large amount of money to keep the CDS trades in place, their profitability was quite low.[2] To finance their operations, Hubler instructed his traders to sell credit default swaps on $16 billion in AAA-rated collateralized debt obligations (CDOs). Hubler and the GPCG bought $2 billion in credit default swaps on extremely risky mortgages, and sold $16 billion in what they believed were safe CDOs. Because of the opaque nature of the CDOs on which they were selling credit default swaps, Hubler and his group did not realize that the CDOs they were insuring contained similarly risky subprime mortgages to the bonds they were betting against. Because of this, Hubler repeatedly assured his company officers and risk management teams that their position was very secure.

After threatening to quit in a dispute over pay and organizational structure, Hubler was paid $25 million for his performance in 2006 and was expected to make significantly more in 2007 if performance continued as it had. However, after the dispute was resolved, the risk management team asked the GPCG to stress-test their portfolio. At a default rate of 6% (the previous historical high), the portfolio remained solvent. When pushed to a hypothetical default rate of 10%, however, the groups projected profits of $1 billion turned into a projected loss of $2.7 billion.[1][2] Hubler argued vociferously that such default levels were unlikely and would never happen.

As the housing market began to collapse and defaults on subprime mortgages began to mount, disputes between Hubler's group and their counterparties began to emerge over the value of the bonds and CDOs that had been subject to credit default swaps. When notified by the counterparties that the value of the CDOs had dropped to levels warranting a payout, Hubler disagreed on the assessment stating that the GPCG's models indicated that the CDOs were worth most of their expected value. Had Hubler conceded the drop in value of the CDOs earlier, the GPCG's losses may have been contained to a relatively small fraction of their overall risk. However, because of his reluctance to follow the procedures outlined in the credit default swaps, GPCG and Morgan Stanley's position worsened over the upcoming months. By the time upper management intervened and removed Hubler, GPCG and Morgan Stanley were liable for nearly 100% of the expected losses. Overall, Hubler's group managed to sell $5 billion worth of the CDOs they had before the market collapsed and realized another $2 billion in revenue from their original credit default swaps, putting the overall losses for his group at $9 billion. Morgan Stanley would lose $58 billion in the financial crisis overall.

After Morgan Stanley

After the extent of the damage was realized by Morgan Stanley's management and risk teams, Hubler was given the option to resign instead of being fired in October 2007. He was paid $10 million in back pay upon his departure.

In 2008 Hubler started the Loan Value Group, an organization that works with mortgage lenders who are dealing with underwater borrowers who are considering a strategic default.[2][5]

Hubler has refused all requests to be interviewed on the topic of his time at Morgan Stanley.[2]

See also


  1. 1.0 1.1 Hagan, Joe (2008-04-27). "Only the Men Survive – The Crash of Zoe Cruz". New York. New York Media. Archived from the original on 2015-04-06. Retrieved 2015-10-18. Unknown parameter |deadurl= ignored (help)<templatestyles src="Module:Citation/CS1/styles.css"></templatestyles>
  2. 2.0 2.1 2.2 2.3 2.4 2.5 2.6 Abelson, Max (2010-03-24). "Howie Hubler of New Jersey: The Return of a Subprime Villain". The New York Observer. Archived from the original on 2015-01-03. Retrieved 2015-10-18. Unknown parameter |deadurl= ignored (help)<templatestyles src="Module:Citation/CS1/styles.css"></templatestyles>
  3. Springer, Kate (2012-05-11). "Top 10 Biggest Trading Losses in History". Time. Time Inc. Archived from the original on 2015-02-15. Retrieved 2015-10-18. Unknown parameter |deadurl= ignored (help)<templatestyles src="Module:Citation/CS1/styles.css"></templatestyles>
  4. Luccchetti, Aaron; Timiraos, Nick (2010-09-13). "After $9 Billion Loss, Trader Revives Career". Wall Street Journal. News Corporation. Archived from the original on 2015-01-14. Retrieved 2015-10-18. Unknown parameter |deadurl= ignored (help)<templatestyles src="Module:Citation/CS1/styles.css"></templatestyles>
  5. Blackden, Richard (2010-09-13). "Trader blamed for Morgan Stanley's $9bn loss back in business". The Daily Telegraph. Telegraph Media Group. Archived from the original on 2015-02-28. Retrieved 2015-10-18. Unknown parameter |deadurl= ignored (help)<templatestyles src="Module:Citation/CS1/styles.css"></templatestyles>