Almost exactly a year after Morgan Stanley agreed to pay $2.6 billion to close the books on a Department of Justice investigation related to it role in the subprime mortgage crisis, the company is set to pay another $3.2 billion to settle federal and state allegations that it deceived investors in toxic mortgage-backed securities.

Morgan Stanley employees were accused of misleading investors about the quality of the residential mortgages that were tied to these securities. Rather than admit that these loans had been sloppily underwritten and posed a high risk to investors, the bank instead presented them as healthy investments backed by solid home loans.

Intra-office emails from the bank revealed that Morgan Stanley staffers not only knew that these mortgages were risky, but that they openly joked about their level of toxicity, suggesting names like “Subprime Meltdown,” “Nuclear Holocaust,” “ShitBag,” “Mike Tyson’s Punchout, and “Fludderfish” instead of the security’s chosen name of “Chalfont.”

Employees at Morgan Stanley had already been told to “not mention the ‘slightly higher risk tolerance’” in their emails, because “We are running under the radar and do not want to document these types of things.”

This morning’s settlement was confirmed by New York state Attorney General Eric Schneiderman. New York’s piece of the $3.2 billion is $550 million.

For its part, Morgan Stanley is only saying that “We are pleased to have finalized these settlements involving legacy residential mortgage-backed securities matters.”

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