Court Filing Illuminates Morgan Stanley Role in Lending

Well well, looky what we have here.

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 which one of Wall Street’s leading banks, 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.

“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.

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 new documents and emails, from 2004 to 2007, were recently filed in connection with a lawsuit and are not related to the Justice Department case. But they provide an inside picture of the process through which Morgan Stanley pushed New Century to issue more mortgages with burdensome conditions that would be lucrative for Morgan Stanley — including loans with balloon payments, adjustable interest rates and prepayment penalties that made them harder to refinance.

**snip**
The documents indicate that Morgan Stanley employees were aware of the low credit quality — and occasionally joked about it — even as they continued to snap up loans from New Century. A top due diligence executive at Morgan Stanley, Pamela Barrow, wrote to a colleague in 2006 sarcastically describing the “first payment defaulting straw buyin’ house-swappin first time wanna be home buyers.”

“We should call all their mommas,” Ms. Barrow added in the email. “Betcha that would get some of them good old boys to pay that house bill.”

dealbook.nytimes.com...

From the same link, warnings were issued to Ms. Barrow in an email, see how she responded:

The most urgent warnings came from another lower-ranking due diligence officer, Bernard Zahn, who wrote detailed emails to both Ms. Barrow and Mr. Shapiro explaining, in increasingly urgent terms, problems with the loans they had bought.

“It isn’t ‘just a couple of typos or ‘mistakes’ as it was suggested,” Mr. Zahn wrote. “The more we dig, the more we find.”

Ms. Barrow congratulated Mr. Zahn: “good find on the fraud

.” But rather than pursuing his findings, she immediately went on: “Unfortunately, I don’t think we will be able to utilize you or any other third party individual in the valuation department any longer.”

Fired! Of course they're denying it. But let me remind everyone, Morgan Stanley borrowed 107 Billion during the 2008 bailout.

Morgan Stanley borrowed the most out of all banks during the 2008 bank bailout. Turns out the multi-billion-dollar bailouts of financial firms and major companies during the 2008 financial crisis were just pocket change. According to new data revealed Monday, the Federal Reserve lent banks and companies worldwide up to $1.2 trillion to help keep the U.S. economy from going over the edge, reported Bloomberg News.

www.nydailynews.com...

I'm glad some of these shysters are finally getting rooted out. I just hope the penalties include a lot of prison time for a lot of people. And I'm loving this new age of technology!

Jeezuz!
Two flags and not a lot of conversation hey?
Nobody wants to know for sure how they got screwed again I guess....thanks for posting maybe this will piss off a few more citizens.....

They should've recouped some of that $$$ for their actions in the "farcebook IPO scam" .. This must be besides or plus what their banking end, J.P.Morgan™ lost when they underreported losses tied to the "London Whale" or they are still counting losses tied in with that..

Although gambling is frowned upon on ATS™ I'll wager $20.00 USD to a favorite charity that the top 10 people of that company had an increase of their salary the whole time the scam was in operation?

They lost $10B and underreported the loss at 'about $4B' The Lady who was in charge made $130M in salary while She lost ALL that $$$.. See: "London Whale" then they march the paper from J.P.Morgan™ next door to Morgan/Stanley™ and they run the Farcebook IPO, where the biggest IPO in history is delayed because "Mike the computer guy" accidentally kicked the plug on the one computer they're using. So while the computers were down, ALL the bigShots who could afford a loss were called/advised NOT to buy, while the Ones who could use the uptick in their investments were fleeced...

a reply to: stirling

No biggie, I just wanted to get the info out there. It was a holiday time but it could have been easily missed. I was fortunate to find it perusing the net for interesting tidbits.

a reply to: JimNasium

I don't know if they'll tell the truth on how much was recouped.

You can bet your bottom dollar, those at the top got raises and bonuses they didn't deserve.

The whole dang bunch is as corrupt and evil as a pit of vipers. They should be burned and buried instead of continuously rewarded.

Thanks for the post

a reply to: StoutBroux

And with those who still "play Chris†mas" how many do You think will just look at how much they owe? 8+ people out of 10 won't mail in the rebates/redeem any coupons of the crap they bought and they probably rationalized that purchase with a "but I get $30.00 off w/this mail-in coupon..." and then never mail in the coupon, the very thing that drove that purchase... I'd be surprised if later on We find out that from the months of Oct.-Feb. that 03¢ was removed from each transaction and then when the class action settlement comes about 8 out of 10 victims won't fill out the paperwork to receive the $$$..

The Lady who was in charge of the New York office in the aforementioned JP Morgan™ fraud which involved the 'London Whale' when they under-reported the losses, She made $130M over the 2 years ..

I think this explains it all: