nMorgan Stanley has agreed to pay $225 million to revolve claims centered around losses experienced by corporate credit unions that purchased faulty residential mortgage-backed securities from the New York-based worldwide investment banking firm, according to an announcement from the National Credit Union Administration (NCUA).
The settlement covers claims made by the NCUA Board in 2013 in Kansas and New York federal courts on behalf of several credit unions: U.S. Central Federal Credit Union, Western Corporate Federal Credit Union, Members United Corporate Federal Credit Union, and Southwest Corporate Federal Credit Union. As part of the settlement, NCUA agreed to dismiss pending suits against Morgan Stanley in New York and Kansas federal district courts; also as part of the settlement, Morgan Stanley does not admit any fault.
NCUA announced that it will continue to pursue litigation in several federal courts against financial institutions that include Royal Bank of Scotland, Goldman Sachs, Union Bank of Switzerland, and Credit Suisse, based on the sale of faulty RMBS that caused five corporate credit unions to collapse. In addition, NCUA has pending litigation against financial firms alleging that the firms failed to perform their duties as trustees of RMBS trusts.
Net proceeds from the Morgan Stanley settlement, as well as other settlements, will be used to pay claims against the failed corporate credit unions, according to NCUA.
“NCUA continues to pursue recoveries on behalf of the corporate credit unions against the financial firms we maintain contributed to the corporates’ losses,” NCUA Board Chairman Debbie Matz said. “These actions fulfill our statutory obligation to act in order to minimize costs to the credit union system resulting from the crisis. They also promote accountability and ensure consumers remain protected.”
A spokesperson from Morgan Stanley told DS News that the firm had no comment on the settlement.
According to NCUA Associate General Counsel John Ianno, the U.S. Department of Justice was involved in negotiating the terms of the $225 million settlement with Morgan Stanley.
“We appreciate the efforts of the Department of Justice, with whom we have worked closely in achieving this favorable resolution,” Ianno said.