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Massachusetts Attorney General Martha Coakley said Morgan Stanley & Co. provided billions of dollars in credit lines to New Century "which used Morgan funds to target lower-income borrowers and lure them into loans that consumers predictably could not afford to repay." She added that some Morgan executives referred to New Century as Morgan's "partner" in subprime lending.

Last Thursday Morgan Stanley & Co. agreed to pay $102 million to Massachusetts homeowners and the state, settling allegations that it aided and abetted subprime lender New Century Financial Corp. in taking advantage of consumers.

As part of the settlement, Morgan agreed to "change its business practices" and to provide the AG's office with "information and materials" as part of its ongoing probe of subprime lenders and the securitization process. In a court filing AG Coakley notes that other Wall Street firms are under investigation regarding their securitization practices. Morgan agreed to the deal without admitting or denying any wrongdoing.

The Irvine, Calif.-based New Century Financial Corporation filed for bankruptcy in early 2008.

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