American banking giant Morgan Stanley will pay the federal government US$2.6 billion to settle the mortgage-backed securities lawsuit that the Department of Justice filed against the Wall Street lender over the 2008 global financial crisis.

The amount would add to the total US$35 billion in cash and consumer relief that the three largest U.S. banks - JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc. - have settled with state and federal authorities, Bloomberg reports.

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In 2014, Morgan Stanley paid US$1.25 billion over similar allegations filed by the Federal Housing Finance Agency that it sold faulty mortgaged-backed securities to Fannie Mae and Freddie Mac.

This settlement is on top of a US$275 million it paid the Securities and Exchange Commission (SEC) in July 2014 for underreporting thee number of its delinquent loans that backed subprime mortgage securities.

However, Morgan Stanley's agreement with the Department of Justice's Civil Division may still result in both parties not agreeing on the settlement's final documentation, reports BBR.

Nevertheless, Morgan Stanley spokesman Mark Lake was quoted by Reuters as saying, "We're pleased to settle the matter."

Another financial giant, Goldman Sachs, got a letter this week from the U.S. Attorney's Office in Sacramento, California, that the government may file a civil lawsuit against it.

Morgan Stanley, according to its yearly regulatory filing with the SEC, hiked its legal reserves related to mortgages matters by US$2.8 billion. The move cut its 2014 income from continuing operations by US$2.7 billion or US$1.35 per share.

Morgan Stanley has over 1,300 offices in 42 nations. It provides securities products and services to customers through its affiliates and subsidies by operating in three business segments of institutional securities, global wealth management and asset management.

TagsMorgan Stanley, Lawsuit, 2008 global financial crisis, mortgage crisis