Bear's Rubin, MBS Icon, Quits for Family Reasons


Mortgage market veteran and trading wunderkind Howard Rubin, one of the pioneers of the collateralized mortgage obligation market and considered by his peers to be an important mortgage-backed securities innovator, quit from his current position as chief of MBS trading at Bear, Stearns & Co. last week in order to spend more time with his family. Rubin was at the company for 12 years.

Forever immortalized as a trading genius in the 1989 book Liar's Poker, which chronicled the golden era of the 1980s MBS market, Rubin, 47, started in the industry in 1982 at Salomon Brothers, where he worked under Lew Ranieri on the CMO trading desk and became one of Wall Street's most successful MBS traders. Ranieri once called Rubin "the most innately talented young trader I have ever seen."

After being recruited as head mortgage trader at Merrill Lynch & Co. in the mid-1980s, Merrill's loss of $250 million in 1987 due to unauthorized trades of principal-only securities was blamed on Rubin and made headlines in the financial press.

Commonly called "hiding tickets," Rubin's alleged actions of hiding trades in his desk drawer were touted by The Wall Street Journal and by Merrill, despite the fact that he was vehemently defended by his Salomon trading peers and many others. After a nine-month hiatus from the market, Rubin was aggressively recruited by Chuck Ramsey and John Sites of Bear Stearns, which had been pursuing Rubin since even before he joined Merrill.

"Howie Rubin was the most significant addition to [Bear Stearns'] MBS department and he was the impetus that put us over the top," said Ramsey, who is the CEO of Mortgage Risk Assessment Corp. and a former Bear Stearns mortgage trader and general partner. "We went to No. 1 the next year and he made us a major contender in the MBS market. Rubin was the icing on our cake."

Ramsey says he did not believe the accusations leveled against Rubin by Merrill, and was instead looking to recruit an experienced trader for Bear Stearns that was "better than we were." Rubin fit the bill.

To make up for his nine-month lapse from the market, Ramsey recalls how Rubin, a "calculated mathematician," spent two weeks locked in his office studying every single MBS deal that had transpired, every tranche, every possible impact of each deal, and every structuring detail - at least two times - before venturing onto the trading floor to transact a bond.

"He was and possibly still is the best MBS trader in the history of our business," added Ramsey. "He added a number of significant innovations to the CMO marketplace, which the MBS market needed dearly at that point. Without CMOs, the MBS market would not be what it is today, in terms of liquidity."

Meeting Goals at Bear

Rubin became Bear Stearn's mortgage trading chief this past January, following a six-month sabbatical he took in order to spend more time with his family.

According to spokeswoman Hannah Burns, Rubin retired for the same reason, and does not have another job lined up somewhere else. "He simply retired," she said.

Most recently, Rubin, who could not be reached by press time, was involved in special projects and was not on the trading desk. This past year, he worked with Ramsey on a project involving a shared equity mortgage, Ramsey said.

Rubin boosted Bear's CMO sales tremendously in his role as chief of trading, achieving record sales of $295 billion over the last decade.

Before beginning his finance career at Salomon Brothers, Rubin started off as a chemical engineer fresh out of Lafayette College in 1977. After getting bored with that, he made his living for nearly two years as a professional card-counter in Las Vegas, often wearing disguises to sneak past security guards.

After eventually getting bored with counting cards, he enrolled at Harvard Business School, where he learned about trading bonds from his classmates. He was immediately hooked.

"The trading floor [at Salomon Brothers] feels like a Las Vegas casino," Rubin was once quoted as saying. "You make your bets and handle risk in the midst of a thousand distractions."