Morgan Stanley settles case tied to 2008 crisis

Morgan Stanley on Thursday agreed to pay more than $3.2 billion to settle allegations by state and federal authorities that it downplayed the risk of mortgages it sold in the years before the financial crisis.

In announcing the settlement, New York Attorney General Eric Schneiderman said the bank’s actions contributed to the collapse of the housing market.

This is the latest settlement to come out of a working group established by President Barack Obama in 2012 to investigate wrongdoing in the mortgage market in run-up to the financial crisis. JPMorgan reached a $13 billion settlement with the group, while Citigroup reached a $7 billion agreement and Bank of America agreed to a $ 16.6 billion settlement.

Morgan Stanley was accused of misleading investors about the quality of mortgages it bundled up and sold. In the statement of facts, Morgan Stanley acknowledged that it increased the acceptable risk levels for loans it packaged for investors.

Morgan Stanley previously agreed to pay $1.25 billion to resolve claims by Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac.

The settlement does not include any criminal charges against the company or executives, but the Justice Department said that it preserved the government’s ability to bring such charges.

In a statement, Morgan Stanley said it had set aside money to cover the settlement. “We are pleased to have finalized these settlements involving legacy residential mortgage-backed securities matters,” the company said.

Goldman Sachs is the last remaining of the major banks yet to reach a multibillion settlement on mortgage-backed securities. Goldman said last month that it expected its settlement to cost up to $5 billion.