Since the financial crisis, Wall Street firms have argued that they were victims, just like everybody else, of the bad mortgages that were churned out by subprime lenders like Countrywide and New Century.
The New York Times reports that now, though, a trove of emails and confidential documents, filed in court, reveal the extent to which one of Wall Street’s leading banks, Morgan Stanley, actively influenced New Century’s push into riskier and more onerous mortgages, and brushed aside questions about the ability of homeowners to make the payments.
“Morgan Stanley is involved in almost every strategic decision that New Century makes in securitized products,” a Morgan Stanley internal report from late 2004 said, referring to the loans the bank packaged into mortgage bonds.
The Justice Department is currently examining the relationship between New Century and Morgan Stanley, and the bank’s sale of mortgage securities in the run-up to the financial crisis, according to a person briefed on the matter.
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