Morgan Stanley is paying a huge fine ($3.2 billion) for a precrisis 'magic' trick

Morgan Stanley is paying a huge settlement related to residential mortgage-backed securities, or RMBS, sold before the financial crisis.

   New York Attorney General Eric Schneiderman on Thursday announced a $3.2 billion settlement with the firm over charges it misled investors on the quality of mortgage loans it sold. New York State will receive $550 million.

   "We are pleased to have finalized these settlements involving legacy residential mortgage-backed securities matters. The Firm has previously reserved for all amounts related to these settlements," Morgan Stanley said in a statement.

   The settlement follows an investigation by the Residential Mortgage-Backed Securities Working Group of the Financial Fraud Enforcement Task Force, a joint federal-state working group formed in 2012. "Morgan Stanley securitized and sold RMBS with underlying mortgage loans that it knew had material defects," the Attorney General's office said in a statement.

   The statement described a 2006 email in which Morgan Stanley's due diligence team told a colleague: "Please do not mention the 'slightly higher risk tolerance' in these communications. We are running under the radar and do not want to document these types of things."

   Anothe 2006 email from a due diligence team member included a list of questionable loans, seeking approval for purchase. The email read: "I assume you will want to do your 'magic' on this one?" Goldman Sachs last month announced it would pay a $5 billion settlement related to RMBS sold between 2005 and 2007. That nearly wiped out fourth-quarter earnings for the firm.

   The RMBS Working Group has previously settled with Bank of America for $16.7 billion, JPMorgan for $13 billion, and Citigroup for $7 billion.

Πηγή: businessinsider.com