Morgan Stanley correctly predicted the financial crisis but lost $10 billion on its hedge.

The claim is that Morgan Stanley correctly predicted the financial crisis (the subprime collapse) but lost about $10 billion on its hedge, meaning the trade in Howie Hubler's group that paired short subprime positions with long super-senior CDO positions. The figure is stated as '$10 billion', so a reported loss of roughly $9-11 billion is acceptable. True: credible reporting shows Morgan Stanley took a bearish subprime position and lost about $9-11 billion on the associated position. Mostly true: the story is right, but the loss figure is somewhat further off (for example $7-9 billion or $11-13 billion), or the position is wrongly called a 'hedge'. Mixed: the loss happened but Morgan Stanley's bearish call was partial or only one part of the claim holds. Mostly false: there was a loss, but it was far from $10 billion or not tied to a correct crisis bet. False: no such episode occurred.

Set before the research began.

1. E1 Howie Hubler - Wikipedia Wikipedia · 25 August 2015

   “His actions while handling credit default swaps (CDSs) directly resulted in the loss of roughly US$9 billion during the 2008 financial crisis”

2. E2 Howie Hubler - Wikipedia Wikipedia · 25 August 2015

   “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 mortgage-backed collateralized debt obligations that market analysts considered less risky”

3. E3 STRATTE-MCCLURE v. Stanley United States District Court, Southern District of New York (CourtListener) · 4 April 2011

   “Morgan Stanley then hedged this short position by selling credit default swaps on approximately $13.2 billion of higher-rated “super senior” CDOs.”

4. E4 STRATTE-MCCLURE v. Stanley United States District Court, Southern District of New York (CourtListener) · 4 April 2011

   “On November 2, 2007, Morgan Stanley dismissed Howard Hubler, the managing director of the Proprietary Trading Group who had negotiated the swap positions.”

E2 says Howie Hubler's group at Morgan Stanley made a successful short trade on U.S. subprime mortgages and funded it by selling insurance on AAA-rated CDOs. E3 is a federal court opinion summarising the complaint, and it describes the same short position as hedged with credit default swaps on about $13.2 billion of super-senior CDOs. E1 puts the resulting loss at roughly $9 billion, which falls within the criteria's accepted range of $9-11 billion. E4 links Hubler to these swap positions.