The Business Times

Morgan Stanley reaches US$2.6 billion mortgage deal with US

Published Wed, Feb 25, 2015 · 11:31 PM

[NEW YORK] Morgan Stanley agreed to pay US$2.6 billion to settle probes into its creation and sale of residential mortgage-backed securities, as the US Department of Justice holds another large Wall Street firm to account for the 2008 financial crisis.

The firm increased legal reserves related to mortgage matters by about US$2.8 billion, cutting 2014 income from continuing operations by US$2.7 billion, or US$1.35 a share, Morgan Stanley said Wednesday in an annual regulatory filing. It's the fourth time in the past five quarters that the New York-based bank reduced earnings in the weeks after announcing them.

JPMorgan Chase & Co, Bank of America Corp. and Citigroup Inc - the three biggest US banks - previously settled with federal and state authorities over the probes, agreeing to pay a total of more than US$35 billion in cash and consumer relief. Goldman Sachs Group Inc. disclosed this week that it received a letter from the US Attorney's Office in Sacramento, saying a civil lawsuit may be brought against the firm.

Patrick Rodenbush, a Justice Department spokesman, declined to immediately comment about the settlement.

The agreement follows other regulatory actions against Morgan Stanley over similar allegations. The firm last year agreed to pay US$1.25 billion after the Federal Housing Finance Agency accused it of selling faulty mortgage-backed securities to Fannie Mae and Freddie Mac.

In July, Morgan Stanley reached a US$275 million settlement with the Securities and Exchange Commission over claims it understated the number of delinquent loans backing subprime mortgage securities.


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