U.S. investigators are seeking to settle a probe early next year into Morgan Stanley’s (MS) creation and sale of mortgage-backed securities before 2008’s financial crisis, the New York Times reported, citing a person briefed on the matter.
The Justice Department has been examining the relationship between the investment bank and New Century Financial Corp., a subprime lender that collapsed in the housing bust, the newspaper cited the unidentified person as saying. Authorities are focusing on Morgan Stanley after settling cases against firms including JPMorgan Chase & Co. and Bank of America Corp., according to the paper.
Morgan Stanley has said for years that it faces government inquiries into how it handled home loans and related investment products, and wrote in a November regulatory filing that some cases had reached “advanced stages.” The investigations focus in part on how the firm scrutinized loans it bought and disclosures made to investors, according to the filing.
Mary Claire Delaney, a spokeswoman for New York-based Morgan Stanley, said she couldn’t immediately comment on the case. Emily Pierce, a spokeswoman for the Justice Department, didn’t immediately respond to a message seeking comment outside normal business hours.
To contact the reporter on this story: David Scheer in Seattle at dscheer@bloomberg.net
To contact the editors responsible for this story: Peter Eichenbaum at peichenbaum@bloomberg.net Dan Reichl