Morgan Stanley to pay $2.6B to settle charges over mortgages
NEW YORK >> Morgan Stanley said Wednesday that it has agreed to pay $2.6 billion to settle with the federal government over its role in the mortgage bubble and subsequent financial crisis.
The settlement makes Morgan Stanley the latest Wall Street bank to reach a settlement with federal authorities, following the billions paid by JPMorgan Chase, Bank of America and Citigroup.
The $2.6 billion will go to “resolve certain claims” the Justice Department intended to bring against Morgan Stanley related to its mortgage division, the bank said in a regulatory filing.
The Justice Department declined to comment. In the regulatory filing, Morgan Stanley said the agreement is not been finalized and could fall though.
The New York bank said it will restate its 2014 results as a result of the settlement. It is increasing its legal reserves by $2.8 billion, which will decrease its full-year operating profit by $1.35 per share.
When it reported its full-year results back in January, Morgan Stanley had said it had earned $2.95 a share for the full year. The settlement eats up, on a per-share basis, roughly half of what Morgan Stanley earned last year.
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Wall Street banks have paid tens of billions of dollars in the last two years to settle state and federal charges that they misrepresented the risk subprime mortgage bonds represented to investors. JPMorgan agreed to pay $13 billion in 2013 and last year Bank of America reached a $16.7 billion settlement with the Justice Department over its role in the financial crisis.
Morgan Stanley reached smaller settlements with other federal and state agencies in the last two years. In 2014, the bank paid $1.25 billion to the Federal Housing Finance Authority over the mortgages it sold to the government-sponsored mortgage companies Fannie Mae and Freddie Mac.
Associated Press writer Eric Tucker in Washington contributed to this report.