Morgan Stanley & Co. has agreed to a $102 million with the state of Massachusetts. This was over its subprime mortgage securitization practices, which were found to be full of problems. The news was also confirmed by Massachusetts Attorney General Martha Coakley's office.
Morgan Stanley is accused of being aware of the unsafe lending practices at New Century Financial, which is closed now. It still kept securitizing such mortgages into securities and continued selling them to its clients.
This lead to a lot of losses and many of its customers had to bear the brunt of its actions. The role of Morgan Stanley has received a lot of criticism from various quarters. Many have pointed that if the Company was aware of the risks, it should have made it clients aware of these things.
The latest settlement with Morgan Stanley is a part of a continuing investigation against various Companies involved in the securitization of subprime loans. The state had also resolved an agreement with Goldman Sachs Group, last year. These Companies and their actions lead to the collapse of the mortgage market and many investors also, lost a lot of money due to this.
As part of the agreement, Morgan Stanley will pay money to borrowers, the state of Massachusetts and state pension funds who lost money due to its carelessness.
The Massachusetts Attorney General’s office has collected nearly $440 million from Wall Street firms and others for their roles in the subprime-mortgage disaster.