02/03/2016-2

http://www.wsj.com/articles/morgan-stanley-to-pay-63-million-to-settle-mortgage-bond-suit-1454446633

Morgan Stanley to Pay $63 Million to Settle Mortgage-Bond Suit

Morgan Stanleyagreed to pay $62.95 million to settle allegations指控that it misrepresented歪曲mortgage-backed securities sold before the 2008 financial crisis.

The settlement was struck with the Federal Deposit Insurance Corp., which had sued Morgan Stanley on behalf of three banks that failed either during or after the crisis. As part of the deal, Morgan Stanley didn’t admit liability for its alleged actions.

The FDICsaid the investment bank misrepresented claims in the offering documentsfor 14residential mortgage-backed securitiessold to Colonial Bank of Montgomery, Ala.; Security Savings Bank of Henderson, Nev.; and United Western Bank of Denver.

Morgan Stanley declined to comment on the settlement.

These specific kinds of bonds, knownas RMBS, are usually backed by home mortgages.

Tuesday’s settlement brings to $86.95 million the value of all RMBS-related settlements Morgan Stanley has agreed to with the FDIC. Last year, Morgan Stanley agreed to pay $24 million to settle similar claims involving RMBS sales to Franklin Bank of Houston, which had also collapsed.

In February 2015, Morgan Stanley agreed to pay $2.6 billion in a separate agreement stemming from the sale of mortgage bonds, handing the Wall Street firm its biggest legal bill from the financial crisis.The accord ended a U.S. Justice Department probe into allegationsMorgan Stanley deceived欺骗investors by misrepresenting the quality of the home loans the firm packaged into bondsand follows multibillion-dollar pacts协定the government struck with other big banks.

文章大意：

Morgan Stanley在之前发行residential mortgage-based security的时候未向投资者正确披露underlying asset(home loans)的quality，从而被罚款

个人感受：

企业道德在金融尤其投行是一个至关重要的东西，不知一个毕业生从innocent analyst变黑化的时间又有多长？如果能稳赚的东西投行不会骗人吧，也许是这个东西实在卖不出去了？

相关知识：

太多了，老子已忘。

Mortgage:

如A要买房子，但无法一次付清。于是向B签订协议说每段时间给B多少$的钱，同时住进房子里。但是当A default, B有权利将房子收回卖给别人。因此，B固定时间段可以收到一笔钱，同时在default的时候有权利access to the asset来减少自己的损失。

在这里的话B是将residential loan卖给morgan stanley了，morgan Stanley首先要给B一笔钱。同时，CDEFG也会将相同的loan卖给morgan.因此morgan就有很多不同形式的loan.于是morgan将这么多不同的loan pool到一起变成一个证券的形式卖出给investor，并负责给予此security的coupon。

另外，morgan会自己组合他所拥有的asset, issue出来不同等级(trench)的security, ranging from AAA to ???.于是investor根据自己的喜好购买。当公司破产？（还是default?）的时候，先从最低级absorb loss,然后再越来越高。（hedge fund一般购买高风险的）

一个问题就是其实这些背后的固定资产本质不是低风险的，但是公司将很多不同类型的资产combine在一起，diversification将其“变成”高评级的债券发行出去。因此很多ABS都有高评级，而人们却demand higher return (也是因为人们知道他们的风险)

其余的都忘光了。金融危机跟这个有关。

以前笔记：

The securitization process has 2 distinct elements:

1. The transfer of assets from the Seller to a special purpose vehicle (SPV)

2. the SPV’s issuance of debt to fund the purchase of the assets

A bankruptcy remotecompany is a company within a corporate group whose bankruptcy has as little economic impact as possible on other entities within the group. A bankruptcy remote company is often a single-purpose entity.