Morgan Stanley Settles for $2.6 Billion - but What Exactly Did They Do?
by
Kenny Mariasin
The settlement is another one in a long string of regulatory steps taken against the company over similar allegations. Forex Magnates traces back the chronology of negligence by due diligence senior officers.
Morgan Stanley has agreed to pay a $2.6 billion Settlement to the US Department of Justice over the firm’s creation and sale of residential mortgage-backed securities, leading to the 2008 financial crisis.
The settlement is another one in a long string of regulatory steps taken against the company over similar allegations. Last year the firm settled with the Federal Housing Finance Agency for $1.25 billion over accusations that the bank sold faulty mortgage-backed securities to Fannie Mae and Freddie Mac.
The company reached a similar settlement in July for $275 million with the Securities and Exchange Commission over accusations that the company understated the number of delinquent loans backing subprime mortgage securities.
But what exactly did the bank do to warrant these enormous settlements? Highlights of internal documents revealed in legal proceedings show a frightening level of negligence.
For instance, one due-diligence email read, "The real issue is that the loan requests do not make sense." It cited an example of one borrower listing his salary as $12,ooo a month while working at a tarot reading parlour. Another email pointed out that "deteriorating appraisal quality is very flagrant."
Not only did higher-ups pay no heed to these concerns, the situation was made light of by Pamela Barrow, top due diligence executive. Some choice quotes of hers mocking home buyers include, "First payment defaulting straw buyin' house-swappin first time wanna be home buyers," and, "We should call all their mommas." She continues, "Betcha that would get some of them good old boys to pay that house bill."
In direct response to an email from a due-diligence officer, Bernard Zahn, where he voiced concern that the problem was very widespread, she wrote, "Good find on the fraud :)" but continued with a frank, "Unfortunately, I don't think we will be able to utilize you or any other third party individual in the valuation department any longer."
To paint readers a clearer picture we’ve put together a timeline of Morgan Stanley’s role in the years leading to the subprime mortgage crisis.
For reference, New Century Financial Corporation was a real estate investment trust that originated mortgage loans in the United States. As of January 1, 2007, New Century was the second-largest subprime mortgage lender in the US.
This marks the fourth time over the past five years that the company has been forced to reduce earnings in the weeks following an earnings announcement as the company has now cut 2014 income from continuing operations by $2.7 billion due to the increase in legal reserves related to mortgages.
Morgan Stanley has agreed to pay a $2.6 billion Settlement to the US Department of Justice over the firm’s creation and sale of residential mortgage-backed securities, leading to the 2008 financial crisis.
The settlement is another one in a long string of regulatory steps taken against the company over similar allegations. Last year the firm settled with the Federal Housing Finance Agency for $1.25 billion over accusations that the bank sold faulty mortgage-backed securities to Fannie Mae and Freddie Mac.
The company reached a similar settlement in July for $275 million with the Securities and Exchange Commission over accusations that the company understated the number of delinquent loans backing subprime mortgage securities.
But what exactly did the bank do to warrant these enormous settlements? Highlights of internal documents revealed in legal proceedings show a frightening level of negligence.
For instance, one due-diligence email read, "The real issue is that the loan requests do not make sense." It cited an example of one borrower listing his salary as $12,ooo a month while working at a tarot reading parlour. Another email pointed out that "deteriorating appraisal quality is very flagrant."
Not only did higher-ups pay no heed to these concerns, the situation was made light of by Pamela Barrow, top due diligence executive. Some choice quotes of hers mocking home buyers include, "First payment defaulting straw buyin' house-swappin first time wanna be home buyers," and, "We should call all their mommas." She continues, "Betcha that would get some of them good old boys to pay that house bill."
In direct response to an email from a due-diligence officer, Bernard Zahn, where he voiced concern that the problem was very widespread, she wrote, "Good find on the fraud :)" but continued with a frank, "Unfortunately, I don't think we will be able to utilize you or any other third party individual in the valuation department any longer."
To paint readers a clearer picture we’ve put together a timeline of Morgan Stanley’s role in the years leading to the subprime mortgage crisis.
For reference, New Century Financial Corporation was a real estate investment trust that originated mortgage loans in the United States. As of January 1, 2007, New Century was the second-largest subprime mortgage lender in the US.
This marks the fourth time over the past five years that the company has been forced to reduce earnings in the weeks following an earnings announcement as the company has now cut 2014 income from continuing operations by $2.7 billion due to the increase in legal reserves related to mortgages.
Devexperts Checks Off Type 2 SOC 2 Audit for Enhanced Data Security
Network, Learn, Grow | FMAS:24
Network, Learn, Grow | FMAS:24
Get ready to mark your calendars for FMAS:24, returning this May! Take a quick glimpse of what awaits at the Sandton Convention Centre in Sandton, South Africa from May 20-22, 2024.
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Get ready to mark your calendars for FMAS:24, returning this May! Take a quick glimpse of what awaits at the Sandton Convention Centre in Sandton, South Africa from May 20-22, 2024.
Don't miss out on this 5-second invite packed with energy and urgency!
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
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Here's a sneak peek into the FMAS:24 vibrant atmosphere! Join us at Africa’s premium financial event for a transformative experience that combines the best of finance and technology.
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#fmas24 #fmas #fmevents #financeinafrica #traders #investors #affiliates #forexTraders #investmentOpportunities #B2BNetworking #finTech #Innovations #TradingCommunity #BusinessOpportunities #AfricanBusiness #Johannesburg #southafrica
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Here's a sneak peek into the FMAS:24 vibrant atmosphere! Join us at Africa’s premium financial event for a transformative experience that combines the best of finance and technology.
From May 20-22, 2024, the Sandton Convention Centre in Sandton, South Africa, will be the hub for over 3,500 attendees to engage in unparalleled networking opportunities, learn from over 150 industry-leading speakers, and explore innovations from 120+ exhibitors.
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
#fmas24 #fmas #fmevents #financeinafrica #traders #investors #affiliates #forexTraders #investmentOpportunities #B2BNetworking #finTech #Innovations #TradingCommunity #BusinessOpportunities #AfricanBusiness #Johannesburg #southafrica
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Join 3500+ Attendees at FMAS:24 | Africa's Premium Financial Event
Join 3500+ Attendees at FMAS:24 | Africa's Premium Financial Event
Looking to expand your network in #Africa? Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
20-22 MAY 2024
Sandton Convention Center, Sandton, South Africa
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#fmas #fmas24 #fmevents #networking #finance #africa
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Looking to expand your network in #Africa? Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
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Join 3500+ Attendees at FMAS:24 - Africa's Premium Financial Event
Join 3500+ Attendees at FMAS:24 - Africa's Premium Financial Event
Looking to expand your network in #Africa?
Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
20-22 MAY 2024
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#fmas #fmas24 #fmevents #networking #finance #africa
Looking to expand your network in #Africa?
Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
20-22 MAY 2024
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#fmas #fmas24 #fmevents #networking #finance #africa
Where the Prop Trading Industry Goes from Here | Finance Magnates Podcast
Where the Prop Trading Industry Goes from Here | Finance Magnates Podcast
Explore the tumultuous world of prop trading in this Finance Magnates podcast episode, featuring insights from Head of Axi Select, Greg Rubin.
We're discussing the challenges and shifts caused by MetaQuotes' pivotal decisions affecting MT4 and MT5 users, and how Axi Select offers a unique, realistic path to professional trading, steering clear of traditional prop firm pitfalls.
Tune in for expert analysis on the future of trading and innovative funding models.
The Axi Select programme is only available to clients of AxiTrader Limited. CFDs carry a high risk of investment loss. In our dealings with you, we will act as a principal counterparty to all of your positions. This content is not available for AU, NZ, EU and UK residents. For more information, refer to our Terms of Service. Standard trading fees apply.
This content is provided solely for general informational purposes and should not be construed as financial product advice or an investment recommendation. It has been prepared without considering your personal circumstances.
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Explore the tumultuous world of prop trading in this Finance Magnates podcast episode, featuring insights from Head of Axi Select, Greg Rubin.
We're discussing the challenges and shifts caused by MetaQuotes' pivotal decisions affecting MT4 and MT5 users, and how Axi Select offers a unique, realistic path to professional trading, steering clear of traditional prop firm pitfalls.
Tune in for expert analysis on the future of trading and innovative funding models.
The Axi Select programme is only available to clients of AxiTrader Limited. CFDs carry a high risk of investment loss. In our dealings with you, we will act as a principal counterparty to all of your positions. This content is not available for AU, NZ, EU and UK residents. For more information, refer to our Terms of Service. Standard trading fees apply.
This content is provided solely for general informational purposes and should not be construed as financial product advice or an investment recommendation. It has been prepared without considering your personal circumstances.
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