New filings show another major bank pushed risky mortgage lending

According to court documents, employees at the bank knew about, and even joked about, some borrowers' inability to pay on their mortgages.

The U.S. Department of Justice (DOJ) is looking into the relationship between Wall Street bank Morgan Stanley and the now-defunct New Century Financial Corp. during the run-up to the housing bust.

Court filings show Morgan Stanley pushed subprime lender New Century into making riskier mortgages, according to the New York Times. Emails and other documents filed in court also show Morgan Stanley employees knew about, and even joked about, some borrowers' inability to pay on their mortgages.

At the height of the pre-housing bubble, New Century was the nation’s second-largest subprime mortgage originator. Morgan Stanley was regularly the biggest buyer of the company's subprime mortgages.

"Morgan Stanley is involved in almost every strategic decision that New Century makes in securitized products," the Times quoted from an internal 2004 Morgan Stanley report.

The DOJ and Morgan Stanley are aiming to reach a settlement early this year.