NEW YORK CITY - A US credit union regulator has filed suit against Morgan Stanley for misrepresenting the quality of $566 million in residential mortgage-backed securities sold to two now-defunct credit unions.
The National Credit Union Administration accused Morgan Stanley and its affiliates of misleading the US Central Federal Credit Union and Western Corporate Federal Credit Union (WesCorp) about the risks of subprime mortgage securities it sold them between 2004 and 2007.
"Firms like Morgan Stanley sold securities that turned out to be faulty, triggering a crisis in the credit union industry that has been extremely expensive to contain and repair, and credit unions are still paying the tab," NCUA Board Chairman Debbie Matz said in a statement.
"All the credit unions we supervise and insure are sharing this burden. The people who are accountable, those who precipitated this crisis, should be required to shoulder that burden, as well."
The lawsuit was the latest in a string of similar suits the NCUA has filed against investment banks such as Barclays Capital, Goldman Sachs, JP Morgan Securities and Wachovia.
So far, the agency has settled claims worth more than $335 million with Citigroup, Deutsche Bank Securities, HSBC and Bank of America.