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Morgan Stanley Settles with FDIC For $32B

Posted by admin on February 11, 2016
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Morgan Stanley agreed to pay $62.95 million to settle allegations that it misrepresented mortgage-backed securities sold before the 2008 financial crisis.

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The settlement was struck with the Federal Deposit Insurance Corp., which had sued Morgan Stanley on behalf of three banks that failed either during or after the crisis. As part of the deal, Morgan Stanley didn’t admit liability for its alleged actions.

The FDIC said the investment bank misrepresented claims in the offering documents for 14 residential mortgage-backed securities sold to Colonial Bank of Montgomery, Ala.; Security Savings Bank of Henderson, Nev.; and United Western Bank of Denver.

Morgan Stanley declined to comment on the settlement.

These specific kinds of bonds, known as RMBS, are usually backed by home mortgages.

Tuesday’s settlement brings to $86.95 million the value of all RMBS-related settlements Morgan Stanley has agreed to with the FDIC. Last year, Morgan Stanley agreed to pay $24 million to settle similar claims involving RMBS sales to Franklin Bank of Houston, which had also collapsed.

In February 2015, Morgan Stanley agreed to pay $2.6 billion in a separate agreement stemming from the sale of mortgage bonds, handing the Wall Street firm its biggest legal bill from the financial crisis. The accord ended a U.S. Justice Department probe into allegations Morgan Stanley deceived investors by misrepresenting the quality of the home loans the firm packaged into bonds and follows multibillion-dollar pacts the government struck with other big banks.