Morgan Stanley to pay $3.2 billion for subprime mortgage meltdown

Morgan Stanley

Morgan Stanley is paying $3.2 billion for its part in the subprime mortgage housing crisis that led to an economic meltdown and the Great Recession.

The agreement includes a federal penalty of $2.6 billion announced by the US Department of Justice, and a settlement of $550 million for New York State announced by New York Attorney General Eric Schneiderman.

“Today’s agreement is another victory in our efforts to help New Yorkers rebuild in the wake of the financial devastation caused by major banks,” said Schneiderman.

The New York attorney general is a lead member of the RMBS Working Group, a coalition of state and federal prosecutors established by President Obama in 2009 to bring Wall Street to task for causing the housing market meltdown.

In a prepared statement the investment bank said, “We are pleased to have finalized these settlements involving legacy residential mortgage-backed securities matters.”

Lawmakers have so far recovered $36 billion from Wall Street firms that marketed and sold high-risk mortgage-backed securities, or RMBS, which were issued from 2005 to 2007.

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Other large payments included $16.65 billion from Bank of America, $13 billion from JPMorgan Chase, and $7 billion from Citigroup.

Shares at Morgan Stanley are down 6.7% following the agreement.

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Written by John Howard

John Howard

John Howard is the Business Editor at He is an avid watcher of markets, a wallflower of retail, and a fan of disruptive businesses that utilize technology and unique ideas to form brilliant new ways of doing business. He can be reached at College Reviews.