Report: Feds Investigating Morgan Stanley ‘Dead Presidents’ Deals


It might be hard to believe from the furor surrounding them and for readers of the New York Times, but Goldman Sachs wasn't the only firm creating collateralized-debt obligations that allowed people to bet against the housing market. Now, The Wall Street Journal is reporting, U.S. prosecutors are looking into some of the CDOs created by Morgan Stanley, to determine whether they misled investors about the quality of the bonds. It's unlikely that politicians and pundits will get themselves in quite as much of a lather over this one, though, since despite the fact that Morgan Stanley created and bet against the CDOs, the firm overall lost way more money betting on than against the housing market; plus, it never marketed the CDOs to clients. And if you ask us, if the Feds are trying to say that Morgan Stanley was telling investors these things weren't crap, they don't have a leg to stand on. Check out what they named the things:

Among the deals that have been scrutinized are two named after U.S. Presidents James Buchanan and Andrew Jackson, a person familiar with the matter said. . Traders called them the "Dead Presidents" deals.

James Buchanan was one of our worst presidents ever! Why would you buy a bond with his name on it? He isn't even on any currency. Andrew Jackson, however, could go either way. They should have gone with Millard Fillmore.

U.S. Probes Morgan Stanley [WSJ]