Banks' Bill in FHFA Cases: $9 Billion and Counting
The settlements just keep on coming in the Federal Housing Finance Agency's bruising battle with major Wall Street banks. The latest deal was announced late Tuesday, when Morgan Stanley revealed it would pay $1.25 billion for allegedly selling faulty mortgage-backed securities to Fannie Mae and Freddie Mac.
The deal brings the total settlement tally in the FHFA litigation above the $9 billion mark.
The FHFA was named conservator of Fannie and Freddie in the wake of the financial crisis. The agency sued Morgan Stanley and 17 other banks in the summer of 2011, alleging they violated state and federal securities laws in connection with the sale of a combined $200 billion in securities backed by shoddy loans. Tuesday's deal resolves claims that Morgan Stanley misled Fannie and Freddie in connection with the sale of about $10.6 billion in mortgage-backed securities.
Davis Polk & Wardwell represented Morgan Stanley. Kasowitz Benson Torres & Friedman represented the FHFA. Quinn Emanuel Urquhart & Sullivan, which represents the FHFA in the bulk of its cases against the banks, was conflicted out of the Morgan Stanley case.
The U.S. district judge in Manhattan overseeing the cases, Denise Cote, has sided with the FHFA's lawyers at Quinn Emanuel and Kasowitz Benson at pretty much every turn (see some of our prior coverage here, here, and here, and here). A trial against Bank of America Corp.'s Merrill Lynch & Co. is scheduled for June 2014. Morgan Stanley faced a January 2015 trial date prior to Tuesday's settlement, though the FHFA's lawyers had requested to move up the date to September 2014.
Morgan Stanley is the seventh defendant to cut a deal so far. The others, listed in chronological order along with the amount they paid, are General Electric Co. ($6 million), Citigroup Inc. ($250 million), UBS AG ($885 million), JPMorgan Chase & Co. ($4 billion), Ally Financial Inc. ($475 million) and Deutsche Bank AG ($1.9 billion). (We're not including the $1.1 billion JPMorgan paid to resolve mortgage repurchase claims not included in the FHFA's complaint.) Wells Fargo & Co. settled out of court for $335 million.
The Kasowitz Benson team on the case included Marc Kasowitz, Kanchana Wangkeo Leung, Michael Hanin and Christopher Johnson.
The Davis Polk attorneys representing Morgan Stanley included James Rouhandeh, Brian Weinstein and Daniel Schwartz.