Morgan Stanley said on Thursday that it had set aside legal reserves to cover the agreement and would not take any additional charges in its upcoming financial results.
“We are pleased to have finalized these settlements involving legacy residential mortgage-backed securities matters,” a spokesman for the firm, Mark Lake, said in a statement.
Morgan Stanley relied on a few subprime mortgage originators, especially New Century, to feed its bond pipeline. In the settlement this week, Morgan Stanley agreed to a statement of fact that includes revealing details about its relationship with New Century.
The statement says that Morgan Stanley employees frequently tried to increase the “pull-through rate” of New Century loans getting into securities, even when the loans were lower quality than expected. Emails cited in the document suggest that Morgan Stanley employees knew that they were bending the rules to include riskier loans.
“Please do not mention the ‘slightly higher risk tolerance’ in these communications,” one employee said in an email quoted in the statement. “We are running under the radar and do not want to document these types of things.”
Morgan Stanley’s close ties to New Century were previously put on public display in a lawsuit filed against the bank by the American Civil Liberties Union.
As part of the settlement, Morgan Stanley will pay $150 million in cash to New York State, and another $400 million in consumer relief, according to the office of the New York attorney general, Eric T. Schneiderman.
The agreement struck this week leaves Goldman Sachs as the last of the big Wall Street banks not to have completed its settlement with the federal working group. Goldman said last month that it expected its settlement to cost up to $5 billion.
http://www.nytimes.com/2016/02/12/b...e-bonds.html&eventName=Watching-article-click
“We are pleased to have finalized these settlements involving legacy residential mortgage-backed securities matters,” a spokesman for the firm, Mark Lake, said in a statement.
Morgan Stanley relied on a few subprime mortgage originators, especially New Century, to feed its bond pipeline. In the settlement this week, Morgan Stanley agreed to a statement of fact that includes revealing details about its relationship with New Century.
The statement says that Morgan Stanley employees frequently tried to increase the “pull-through rate” of New Century loans getting into securities, even when the loans were lower quality than expected. Emails cited in the document suggest that Morgan Stanley employees knew that they were bending the rules to include riskier loans.
“Please do not mention the ‘slightly higher risk tolerance’ in these communications,” one employee said in an email quoted in the statement. “We are running under the radar and do not want to document these types of things.”
Morgan Stanley’s close ties to New Century were previously put on public display in a lawsuit filed against the bank by the American Civil Liberties Union.
As part of the settlement, Morgan Stanley will pay $150 million in cash to New York State, and another $400 million in consumer relief, according to the office of the New York attorney general, Eric T. Schneiderman.
The agreement struck this week leaves Goldman Sachs as the last of the big Wall Street banks not to have completed its settlement with the federal working group. Goldman said last month that it expected its settlement to cost up to $5 billion.
http://www.nytimes.com/2016/02/12/b...e-bonds.html&eventName=Watching-article-click
