Morgan Stanley No Longer the “Litigation-Free” Play

Shares of Morgan Stanley MS are falling in the pre-market by 5.14% to $26.92 after federal prosecutors were said to have been investigating whether MS misled investors about mortgage-derivatives deals it helped design and sometimes “bet against.” Washington seems to be upping its scrutiny on institutions across the board lately in the first real attempt to dig into the mortgage mess of 2008-2009. Morgan Stanley arranged and marketed to investors pools of bond-related investments called collateralized debt obligations (CDO) and their trading desk apparently, at times, took the other side of the trade, one trader says. A Morgan Stanley spokesman said, "We've had no contact with the Justice Department or U.S. Attorney's Office regarding these transactions."