The American Civil Liberties Union is suing Morgan Stanley and accusing them of producing risky loans targeting African-American borrowers.
Detailed in an article by The New York Times’ Jessica Silver-Greenberg, the ACLU filed a lawsuit October 15 that claimed the bank lended billions to now-defunct subprime lender New Century Financial Corporation, and from 2004 to 2007, pressured New Century to give loans to African-Americans who could not afford to repay them.
According to Silver-Greenberg: “Morgan Stanley packaged the loans made by New Century and sold them to pension funds and other large investors. But, the lawsuit claims, the bank went beyond the traditional role of an investment bank by requiring that the mortgage company churn out the wildly profitable loans that came with ‘dangerous’ characteristics.”
This ACLU lawsuit claims Morgan Stanley violated the Fair Housing Act and the Equal Credit Opportunity Act, complaining that “Morgan Stanley actively encouraged lending tactics that increased the levels or risk associated with individual loans.”
For more on the ACLU’s claims against Morgan Stanley, visit The New York Times.
