Though it never disclosed its substantial exposure to the subprime housing market ahead of that bubble’s burst in 2008, Morgan Stanley is not liable, the 2nd Circuit ruled Monday.

Shareholders had sought relief with regard to two multibillion dollars trades by Morgan Stanley in 2006 of residential mortgage-backed securities.

In its $2 billion deal, Morgan Stanley bid short on credit default swaps (CDs) and collateralized debt obligations (CDOs) backed by subprime residential mortgage-backed securities – essentially betting that the housing market was overvalued and due for a decline.

It also placed $13.5 billion in a long position selling similar CDs, which were backed by higher-rated, lower-risk residential mortgage-backed securities.

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