Feb 4 Morgan Stanley said it would pay
$1.25 billion to the U.S. regulator for Fannie Mae and
Freddie Mac to settle a lawsuit related to the sale of
The Wall Street bank will add $150 million to its legal
reserves as a result of the settlement with the Federal Housing
Finance Agency, Morgan Stanley disclosed in a regulatory filing
on Tuesday. ()
A Federal Housing Finance Agency (FHFA) spokeswoman declined
to comment, except to confirm the settlement.
Several large U.S. banks have set aside extra money to pay
for potential legal costs in the aftermath of JPMorgan Chase &
Co's massive $13 billion settlement with U.S.
authorities over bad mortgages.
The FHFA in January said it had recouped nearly $8 billion
through settlements with financial institutions it sued in 2011
over allegedly false and misleading statements relating to some
$200 billion in mortgage-backed securities sold to Fannie and
The housing authority commenced lawsuits against 18
financial institutions in 2011.
Last December, Deutsche Bank said it would pay $1.9 billion
to settle claims, while Citigroup paid $250 million.
Morgan Stanley added $1.2 billion in the fourth quarter to
its litigation reserves, and cited investigations "related to
residential mortgage-backed securities and the credit crisis" as
the motivation for doing so.
Chief Executive James Gorman had said the legal charges were
a "significant progress" towards resolution of matters.
Morgan Stanley did not disclose specific details about the
litigation in Tuesday's filing.
The addition to reserves will reduce Morgan Stanley's
earnings from continuing operations by 5 cents for the fourth
Morgan Stanley reported stronger-than-expected fourth
quarter results on Jan. 17.