The Securities Exchange Commission (SEC)’s website lists 161 firms or individuals it has charged and tallies $2.7 billion in fines levied in relation to the financial crisis. Morgan Stanley does not appear on either list. The Justice Department declined to comment on the matter, but has not yet charged Morgan Stanley in relation to the crisis. Meanwhile, the bank reported that it is not setting money aside to pay major legal bills in the coming months — something most other major banks have done.
Various non-federal cases involving the bank make the government’s inability to lay a glove on Morgan Stanley all the more peculiar. The firm paid Massachusetts $102 million to forestall an investigation into its relationship with a notoriously fraudulent subprime lender called New Century before there could be charges. In Washington state, a civil suit the bank settled for an undisclosed amount of money produced documents showing Morgan Stanley knowingly misrepresented the value of various home loans it had packaged up for resale as an investment vehicle. Neither case has led federal regulators or prosecutors to go after the almost 80-year-old bank. One lawyer who has worked on multiple civil cases involving Morgan Stanley crisis-era misdeeds told Fortune he’s “seen no evidence that Morgan Stanley is less culpable than other firms.”
As glaring as the bank’s squeaky-clean escape from financial crisis punishments is, it’s not as though the remainder of the industry has faced staggering legal consequences. The $66 billion the largest banks have spent in litigation costs since 2010 may seem like a lot of money, but it is less than one third of the profits those companies have booked in the same period and about one percent of what the crisis cost America. That $66 billion isn’t limited to charges involving the financial crisis itself, either, and Morgan Stanley has paid to settle charges relating to the post-crisis foreclosure abuses that account for most of that industry total.
But despite the deals and deceptions that fueled the crisis itself, the industry appears poised to pass through the five-year statute of limitations without facing serious consequences. The SEC has reportedly given up on several of its most prominent investigations relating to the crisis. The Justice Department is supposedly going to file “significant” charges this fall, but if they prove to be truly major rather than cosmetic that would break with the pattern that agency has followed with regard to Wall Street abuses.