Morgan Stanley agreed to pay $102 million to settle claims by Massachusetts that the firm financed and securitized unfair residential loans, state Attorney General Martha Coakley said.
The bank will provide $58 million to more than 1,000 Massachusetts homeowners, and will also make payments to the Massachusetts Pension Fund for investment losses and the Commonwealth's General Fund, Coakley said during a press conference Thursday in Boston.
"This has become an all-too-familiar pattern in which the deceptive practices of Wall Street devastated homeowners and investors, and ultimately contributed to the collapse of our economy," Coakley said. "Our extensive investigation revealed that Morgan Stanley not only backed loans for homeowners that they should have known were destined to fail, they also caused additional damage in the subprime marketplace."
The bank is barred from making unfair loans and will be required to make additional disclosures going forward, Coakley said. She claimed Morgan Stanley provided billions of dollars to subprime lender New Century, which used Morgan funds to target lower-income borrowers and lure them into loans that consumers predictably couldn't afford to pay.
These loans often were unsustainable, though they were profitable for the lenders, the attorney general said.
