More than a decade after the mortgage crisis blew a hole in the United States economy, banks and prosecutors are still sorting out the tab for the damage.
The latest reckoning came on Thursday, when Morgan Stanley agreed to pay $150 million to settle claims by the State of California that it misled investors about the risks of mortgage-backed securities sold to two state pension funds for teachers and public employees.
The case was the last remaining government lawsuit against the bank over issues related to the financial crisis, according to Mark Lake, a spokesman for Morgan Stanley. In the agreement, which included no admission of wrongdoing, Morgan Stanley denied the state’s accusations.
Banks have paid more than $240 billion in fines and penalties for their actions during the crisis, according to a tally kept by the investment bank Keefe, Bruyette & Woods.
In 2016, Morgan Stanley paid $3.2 billion to settle state and federal claims that it had misled investors about the quality of the loans underlying its mortgage-backed securities. Later that year, California sued the bank over the losses its pension funds had incurred in connection with those investments. Last year, a state judge in the San Francisco Superior Court rejected the bank’s motion to have the case dismissed.
“Morgan Stanley lied about the risk of its products,” said Xavier Becerra, the state attorney general. “Today’s settlement holds Morgan Stanley accountable for misleading Californians who were unfairly blindsided.”
The California Public Employees’ Retirement System, known as CALPERS, will receive $122 million from the settlement, and the California State Teachers Retirement System will collect $8 million. The attorney general’s office will keep the remaining $20 million.
