Morgan Stanley Settles With Insurer, Shares Rise

Morgan Stanley said it has reached a settlement with MBIA that will get some risky financial instruments off its books and will resolve pending litigation between the two companies.

Morgan Stanley
Oliver P. Quillia for
Morgan Stanley

The agreement includes a cash payment from MBIA , but Morgan Stanley did not disclose the amount of the payment.

The bank said that the settlement will result in a $1.8 billion pre-tax charge in the current quarter.

MBIA had filed a lawsuit against Morgan Stanley over risky residential mortgage-backed securities, but is now withdrawing that suit. Morgan Stanley will withdraw its lawsuit challenging the bond insurer's restructuring.

The bank said the settlement significantly cuts its risky assets and helps boost a key capital measure.