NEW YORK (TheStreet) -- Shares of Morgan Stanley (MS) are flat at $38.99 in pre-market trading after it was reported that the financial services company may settle a mortgage investigation early next year, the New York Times reports.
Since the financial crisis, Wall Street firms have argued that they were victims, just like everybody else, of the bad mortgages that were churned out by subprime lenders like Countrywide and New Century. Now, though, a trove of emails and confidential documents, filed in court, reveal the extent to Morgan Stanley actively influenced New Century's push into riskier and more onerous mortgages, and brushed aside questions about the ability of homeowners to make the payments, the Times said.
"Morgan Stanley is involved in almost every strategic decision that New Century makes in securitized products," a Morgan Stanley internal report from late 2004 said, referring to the loans the bank packaged into mortgage bonds, according to the Times.
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The Justice Department is currently examining the relationship between New Century and Morgan Stanley, and the bank's sale of mortgage securities in the run-up to the financial crisis, according to a person briefed on the matter. After winning tens of billions of dollars from other banks, the Justice Department has turned its focus to Morgan Stanley, and is aiming to reach a settlement early next year, according to the person, the Times said.