The Slatest

Morgan Stanley Agrees to $2.6 Billion Settlement for Role in Housing Bubble

Morgan Stanley logo at the bank’s headquarters.

Photo by Mario Tama/Getty Images

Morgan Stanley announced a settlement with the federal government on Wednesday, agreeing to pay $2.6 billion to resolve a probe into the mortgage-backed securities the bank traded that contributed to the 2008 financial crisis.

The settlement, which comes as Attorney General Eric Holder prepares to leave the DOJ, is the latest in a string of Wall Street banks striking financial agreements for their role in inflating the housing bubble that sent the U.S. economy tumbling into the Great Recession. “Other large banks have already struck similar settlements, with Bank of America agreeing to pay a record $16.7 billion last year and JPMorgan Chase settling for $13 billion in 2013,” the New York Times reports. “Compared with other Wall Street banks, Morgan Stanley was responsible for a smaller volume of securities backed by troubled mortgages, the investments at the heart of the settlements.”

Last year, Morgan Stanley agreed to pay $1.25 billion for the bad mortgage securities it sold to Fannie Mae and Freddie Mac.

“The size of the [latest] settlement is something of a blow for Morgan Stanley, which has been struggling to improve profitability since the financial crisis and has lagged behind some of its biggest competitors,” according to the Times. “Unlike other banks that have struck mortgage settlements, Morgan Stanley did not strike a comprehensive deal to provide homeowner relief and dispense with the claims that have been put forward by various states.”