Morgan Stanley Pension Suit: Fund Claims Bank Sold It A $1.2B CDO In Bad Faith

Yahoo! News:

NEW YORK (Reuters) -- Morgan Stanley (MS.N) has been sued by a Virgin Islands pension fund that accused the Wall Street bank of defrauding investors by marketing $1.2 billion of risky mortgage-related notes that it expected to fail.

Read the whole story: Yahoo! News

Comments

[mountainweb]

07:08 PM on 01/01/2010

Morgan Stanley should be pounded into the ground and made to pay double on this kind of criminal activity..... Managers should be fired!

[CAPTAINSKIPPY]

02:02 AM on 12/31/2009

Aren't these guys the "experts" on risk? Maybe the bonuses they get don't tell the whole story. If the DOJ doesn't put them out of business, perhaps a few good personal injury attorneys will!

[martinfrosa]

01:40 PM on 12/30/2009

Most of the people who run pension funds are underqualified to handle the massive amounts of money they oversee. They have no business investing in these types of assets and have only themselves to blame.

Do they remember how Merrrill Lynch bankrupted Orange County by selling it derivatives? No, I don't think they do.

Fools all! Their chances in court are Zero.

[marijam]

05:49 AM on 12/30/2009

It's about time something like this came about. There needs to be more pension funds suing for 'bad faith'.

[unionave]

05:47 AM on 12/30/2009

This is where TORT law changes by Congress will help these big banks walk away with impunity after destroynig whole economies with reckless investments . TORT reform is not just for medical malpractice as the media would have us believe . It is very far reaching .

[Wendy Davis]

03:21 AM on 12/30/2009

This is what I am talking about!

[duxguts]

02:05 AM on 12/30/2009

I don't like your chances, but have a go. At least the lawyers will make some money.

[tokyobound]

10:01 PM on 12/29/2009

Excellent - I'm all for people who think they've been aggrieved to have their day in court. And I think they'll lose - because contrary to what most on this site would have you believe, its not a case of "big bad bank" vs "poor little pensioners"'; the fund had its own highly paid advisers, access to due diligence, disclosures, and, most likely, the entire tape of mortages that went into the product. Their issue is with their fund managers, not with the bank, which had 0 fiduciary responsibility to them - it was simply supplying a product (a way to get long house prices) that people wanted.

No matter though....even if they are acquitted in court, bloggers on this site won't give up on the conspiracy theories! I don't know why I bother anymore....

[petef59]

10:19 PM on 12/29/2009

One problem: the bank is as much responsible for THEIR product as the fund managers. It is not a conspiracy theory that fuels the "poor little pensioners" greivance, nor the "big bad bank" as villian: it is exactly those individuals who shirked their due diligence, not 'access to due diligence' that are due a visit from justice. Hiding behind the corporate structure does not pass any ehtics standard.

[petef59]

10:21 PM on 12/29/2009

ETHICS

[tokyobound]

10:24 PM on 12/29/2009

Oh man, you really don't get it.

This was as much a trade between the bank and the pension fund's manager as anything else. The pension fund collected $ every month as long as the housing market was strong; they were betting that would continue to be the case. Morgan Stanley took the opposite view. This was all disclosed to the counterparty. The fund had its own highly paid managers to determine whether this was the right view to take / was risk appropriate and so forth. The bank just facilitated the trade.

Let's see what happens in court. If MS wins, promise to come back and visit me on this thread?

[unionave]

06:01 AM on 12/30/2009

This all came about because of deregulation of the banking laws . This exact same thing happened in the 1980's with a gang of five high society members involved and the US government dished out hundreds of billions to bail out S&L's . Brokerage banks are casinos and should be forced to advertised as such . But they do not .

[nopilikia]

09:57 PM on 12/29/2009

Good luck, but doubt they will win. Until Gramm-Leach-Bliley Act of 1999 is repealed Wall St can continue it's unregulated gambling. One thing the GLB Act did was barred states from regulating CREDIT DEFAULT SWAPS under their gambling and bucket shop laws.

[Whitley2009]

08:13 AM on 12/30/2009

I agree with you if the defendant can show they were guilty of misjudgment or ordinary negligence, and the plaintiff assumed the risk as an informed and skilled manager.

If you can prove, however, a criminal scheme intended to defraud the plaintiff, can't you bypass GLB and pray for actual and punitive damages?

[nopilikia]

05:04 PM on 12/30/2009

Perhaps, but even with a vague "chinese wall" under GLB a Wall St. bank can sell CDS's as a good investment and at the time place a bet against the CDS they sold believing they will turn bad. Legally no law broken, but morally so corrupt it is beyond recognition.

[tokyobound]

09:50 PM on 12/29/2009

I give up. You really wont post my comment will you. Wow.

[themodernleader]

09:26 PM on 12/29/2009

That law suit in an ubiased and equitable justice system has an excellent chance of being won. Somehow, somewhere the swindlers of unleavened banks must be brought to account and go to jail. There must be criminal charges and punishments as well as civil penalties. As Dostoyevsky taught us, crime and punishment must always remain together. To reward crime as the Obama "economic team" has done and is doing, creates a malignancy that may consume the country. Ignoring and rewarding crimes invite ever more licentious and destructive criminal behavor.
A government that knows no difference between right and wrong is a leadership headed in the wrong direction.

[windup]

09:20 PM on 12/29/2009

Great idea. I wish TIAA-CREF would do that.

[tokyobound]

10:04 PM on 12/29/2009

Hmm....lets see. TIAA-CREF is a major institutional investor that employs expensive, highly trained portfolio managers. Are you really going to tell me that they were fooled by the bank? Or, more likely, did they like the substantial yield they were getting from these securities, month after month, until they blew up? A suit like this from a major player like TIAA would laughable and just make their own management look idiotic.

[Peabodies]

08:40 PM on 12/29/2009

ALLRIGHT!! Finallly! a pension fund with guts. I hope this is a MOVEMENT. What is the law for, if not to right wrongs?

[tokyobound]

09:17 PM on 12/29/2009

And what will you say when/if they lose? Let me guess....courts were wrong/"big bad bank" scared the jury?

[freelyb]

10:29 PM on 12/29/2009

You obviously have an interest in a negative outcome for pensioners. Care to share it?

[TJCole]

08:05 PM on 12/29/2009

I guess they're not the Virgin Islands any more, because they got.....

[nopilikia]

10:01 PM on 12/29/2009

And apperantly not even a kiss.

[karen1p]

05:38 AM on 12/30/2009

or lube

[joebaggadonuts]

04:41 PM on 12/29/2009

Hmmm. Collusion with rating agency to rate a CDO highly so it can be sold for more than it's worth. Could be a winner claim. Unfortunately we all were willing to look the other way as bankers got wink and nod home valuations to support high loan values for years so we could buy homes we wanted but couldn't afford for prices which were unsustainable and packaged into these CDOs. Homeowners are rare on juries however, and this lawsuit tells a good story. Pensions ruined by greedy banksters colluding with ratings people who just did what they were told for a fee - why not award the poor pensioners? After all, what the bank and the rating agencies did was not right. And those homeowners on the jury are probably underwater on their mortgages anyway, so even though they got into their house from a similar scheme, their ownership interest is at risk because of it. Why not pull the trigger and ensure this kind of thing doesn't happen again?