A federal investigation into possible criminal fraud on Wall Street is widening—now regulators are reportedly looking into whether Morgan Stanley misled investors about risky mortgage backed securities. The firm's CEO, however, says he's not aware of any inquiry. The Securities and Exchange Commission has already launched a civil lawsuit against Goldman Sachs in a similar case, and prosecutors are considering whether to file criminal charges against the firm. Regulators also reportedly are conducting preliminary investigations into several other large financial firms. Is the SEC declaring war on Wall Street? (Watch a Bloomberg explanation of the charges against Morgan Stanley.)

Morgan Stanley's the biggest target: Goldman Sachs has become "synonymous" with the risky bundled loans at the heart of the mortgage crisis, says Michael Corkery in The Wall Street Journal. But Morgan Stanley was the real trailblazer in selling these investments while betting against them. The only reason the public and Congress are focusing their anger on Goldman Sachs is that Morgan lost so much on its "overall mortgage bets" it nearly collapsed, while Goldman "profited handsomely."
"Morgan Stanley, not Goldman, traders were the real CDO hitters"

Maybe now Goldman will quit pouting: "Goldman Sachs boosters love to complain about how their firm bears the brunt of all the anti–Wall Street fervor," says Dan Freed in TheStreet.com, and "there may actually be a grain of truth to this Goldman propaganda." But now that Morgan Stanley is under investigation, it's clear the SEC isn't picking on a single firm. "What a relief."
"Goldman Sachs can now stop whining"

The SEC has no choice but to investigate everyone: Morgan Stanley's complicated so-called Dead Presidents deals, named Buchanan and Jackson, were particularly "troubling," says Stephen Gandel in Time, but "every major firm on Wall Street had a hand in structuring a Goldman-like deal." There are plenty of "bogus" mortgage-backed security sales for regulators to expose. It looks like the SEC's war on "Wall Street's rotten mortgage machine" is only beginning.
"Just how rotten were Morgan Stanley's mortgage deals?"