MORTGAGE SETTLEMENT ENCORE PLUS

US Authorities this week announced an agreement with Morgan Stanley for $3.2 billion to settle claims it engaged in deceptive practices relating to subprime mortgage backed securities before the financial crisis. Essentially, the US was asserting that Morgan Stanley knew the securities were defective, not suitable for sale and failed to disclosure critical risk information to investors about the securities it arranged.  

Other banks have paid far greater sums, such as BoA at $17 billion and Citigroup at $7 billion. Total claims collected by the US are some $64 billion according to the Associated Press. Total settlements by Morgan Stanley is this area now total $5 billion.  Its legal bills have been less than other firms as it did not take as an active role as the other firms noted above. 

Settlements like these underscore the arguments made by those that say permanent change needs to occur in banking risk culture and conduct, such as the G30 last year.   The ECB late last year also spoke about this issue in Holland... for more information see https://www.bankingsupervision.europa.eu/press/speeches/date/2015/html/se150924.en.html

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