Morgan Stanley settles with Massachusetts AG for facilitating dicey mortgages so it could in turn sell dicey (in)securities (emphasis added):
The deal, the first of its kind in the country with Morgan Stanley, followed an investigation by Coakley’s office into the firm for fueling subprime mortgages written by New Century Financial Corp., a large California lender that went bankrupt in 2007. She said Morgan Stanley knew that New Century was making predatory loans, but continued to provide the lender billions of mortgage dollars by buying the loans to turn them into securities.
Morgan Stanley “uncovered signals pretty early on that the lending practices of New Century were not sound,’’ Coakley said at a press conference yesterday. “Morgan Stanley knew they were making loans designed to fail.’’