Federal prosecutors are investigating whether Morgan Stanley misled investors about mortgage-securities deals it helped design and, in some cases, bet against, the WSJ reports.
This is a bit Deja vu-ish: The WSJ broke a similar story about a criminal investigation of Goldman Sachs a few weeks back.
The Morgan Stanley investigation involves mortgage-related CDOs, including two named after Presidents James Buchanan and Andrew Jackson. Traders called them the "Dead Presidents" deals — a detail that should play nicely in your ripped-from-the-headlines screenplay about Wall Street.
The bank says it didn't do anything wrong and hasn't been contacted by investigators.
"We have no reason to believe there is any substance behind any supposed investigation that appeared in the Wall Street Journal article," CEO James Gorman said today, according to Bloomberg News.
The criminal probe is still in its early stages, and no charges have been filed. It grew out of the SEC's civil investigation of the mortgage-bond business of more than a dozen Wall Street firms, according to the WSJ.
The SEC recently brought a civil case against Goldman; the bank has reportedly been in talks to settle that case. No criminal charges have been filed against Goldman.
Morgan Stanley doesn't face a civil case. And, at least as of late last month, the bank had not received the formal notice that the SEC sends banks when it is considering bringing civil charges.
Here's a brief item from today's Morning Edition on the investigation of Morgan Stanley.