Morgan Stanley will pay $3.2bn to settle federal and state charges that it misled investors in residential mortgage-backed securities during the financial crisis, New York’s attorney general announced on Thursday.
The deal comes a month after Goldman Sachs agreed to pay $5.06bn to resolve civil claims related to the firm’s securitization, underwriting and sale of residential mortgage-backed securities from 2005 to 2007. The Goldman Sachs settlement included $875m in cash payments and $1.8bn in consumer relief.
Goldman Sachs and Morgan Stanley are two of the last big banks to pay up for their role in the 2008 economic crisis. Bank of America agreed to pay the largest of the settlements, at $16.6bn, in 2014. A year prior, JPMorgan Chase paid about $13bn.
“Today’s agreement is another victory in our efforts to help New Yorkers rebuild in the wake of the financial devastation caused by major banks,” said attorney general Eric Schneiderman. “Today’s settlement will deliver resources to the families and communities that need them the most, while helping New Yorkers avoid foreclosure, and spurring the construction of more affordable housing units statewide.”
Schneiderman said the resolution would require Morgan Stanley to provide significant relief to New Yorkers, including loan reductions to help residents avoid foreclosure, and funds to spur the construction of more affordable housing.
On Thursday, Morgan Stanley stock was down almost 40% over the last three months.
In January, the Wall Street bank reported a fourth quarter net revenue of $7.7bn, exceeding expectation. Its earnings were $753m, compared to a loss of $1.75bn the year before.
“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,” Mark Lake, a Morgan Stanley spokesman, said in a statement.