The Justice Department today announced that Morgan Stanley will pay a $2.6 billion penalty to resolve claims related to Morgan Stanley’s marketing, sale and issuance of residential mortgage-backed securities (RMBS). This settlement constitutes the largest component of the set of resolutions with Morgan Stanley entered by members of the RMBS Working Group, which have totaled approximately $5 billion. As part of the agreement, Morgan Stanley acknowledged in writing that it failed to disclose critical information to prospective investors about the quality of the mortgage loans underlying its RMBS and about its due diligence practices. Investors, including federally insured financial institutions, suffered billions of dollars in losses from investing in RMBS issued by Morgan Stanley in 2006 and 2007.
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