In 2003, Morgan Stanley created a proprietary credit default swap for the purpose of shorting bad subprime mortgage bonds.
[2] To finance their operations, Hubler instructed his traders to sell credit default swaps on $16 billion in AAA-rated collateralized debt obligations (CDOs).
However, because of his reluctance to follow the procedures outlined in the credit default swaps, GPCG and Morgan Stanley's position worsened over the subsequent months.
By the time upper management intervened and removed Hubler, GPCG and Morgan Stanley were liable for nearly 100% of the expected losses.
In October 2007, after Morgan Stanley's management and risk teams realized the extent of the damage, Hubler was given the option of resigning instead of being fired.
In 2008, Hubler started the Loan Value Group, an organization that works with mortgage lenders dealing with underwater borrowers who are considering a strategic default.
[2] In the 2015 Adam McKay film The Big Short, Hubler's story is presented under the pseudonym of a Morgan Stanley trader named Benny Kleeger.