FORTUNE -- Morgan Stanley is either the cleanest bank on Wall Street, or it's living in denial.
Talk of JPMorgan Chase's $13 billion settlement has dramatically upped the expectations of what banks may pay to put the financial crisis behind them. On Thursday, in a regulatory filing, Goldman Sachs (GS) estimated it may spend $4 billion more than it has already budgeted for settlements and fines and lawyers fees, up from $3.5 billion three months ago.
In the last week, nearly all of the large banks have disclosed billions in potential additional legal expenses. JPMorgan Chase (JPM) puts that number at $5.7 billion. Bank of America (BAC), which recently was found guilty of selling defective mortgages, isn't far behind at $5.1 billion. Citigroup (C) says $5 billion.
The one exception is Morgan Stanley (MS). In its quarterly report, which the company filed with the SEC on Monday, the bank left blank what its additional legal expenses could be. Instead it said it didn't think the cost would be "material" to its business.
Banks don't have to disclose those costs, and accounting for legal expenses is murky. Financial institutions have reserves, but they don't tell investors how much. Nonetheless, banks, like all firms, are supposed to alert investors if they know of any upcoming costs that could impact earnings. That's what's led to the disclosures of potential additional legal expenses.
Morgan Stanley declined to comment. Some people believe that the legal disclosure is meaningless, because there is no way to know how much a bank has put away for what. That could be why Morgan Stanley doesn't state a figure.
Nonetheless, the lack of legal disclosure likely means that Morgan Stanley believes it will spend far less defending its financial crisis conduct than rivals.
That may be right. As we have noted, Morgan Stanley has completely avoided any prosecution from the federal government tied to the financial crisis. It's the only major bank not to have paid a fine to Uncle Sam. That, of course, could make it the low-hanging fruit for prosecutors. And while Morgan Stanley never made mortgage loans directly to consumers, it sold just as many risky bonds tied to home loans as Goldman and others. Morgan Stanley also disclosed earlier this week that insurer AIG (AIG) is likely to sue the bank for as much as $3.7 billion for losses on mortgage bonds.
Still, Morgan Stanley, more than any of its rivals, appears to be actually complying with the spirit of Dodd-Frank and getting out of risky businesses, rather than trying to find a way around the new laws. That has made it somewhat of a poster child for financial reform. Perhaps it's also hoping that its post-financial crisis good behavior will let it off the hook for past misdeeds. So far it appears to be working.
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FORTUNE -- Two Silicon Valley entrepreneurs suing Goldman Sachs say the Wall Street firm mislabeled shares in the couple's brokerage account in order to be able to assist short-sellers who were betting against the company the couple founded.
A lawyer for the couple, Sehat Sutardja and Weili Dai, co-founders and executives of the MOREStephen Gandel, senior editor - Mar 27, 2012 5:00 AM ET
The Feds are suing 18 banks over the billions Fannie and Freddie lost on toxic mortgages. How solid is their case?
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FORTUNE -- As if the banks didn't have enough problems. Uncle Sam is now suing 18 of the country's largest banks for selling $200 billion in toxic mortgage-backed securities to Fannie Mae and Freddie Mac. Columbia Law School professor Jack Coffee termed the action "the most aggressive MORENov 8, 2011 5:00 AM ET
The guys who got rich running Washington Mutual into the ground are still claiming they had nothing to do with its failure.
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Add Goldman Sachs to the list of big banks sort of bracing for multibillion-dollar legal setbacks in coming years.
Goldman (GS) said in its annual report filed Tuesday that it believes it could end up facing as much as $3.4 billion in losses in coming years on judicial, regulatory and arbitration cases.
That puts Goldman third among the biggest U.S. banks in terms of the legal losses it deems "reasonably possible" beyond whatever MOREColin Barr - Mar 1, 2011 10:15 AM ET
Running a slush fund for Bernie Madoff was nice work for JPMorgan Chase while it lasted.
A new academic paper estimates the bank reaped nearly $1 billion in pretax profits over two-plus decades by servicing a checking account at the center of the giant Ponzi scheme.
The paper, by Linus Wilson of the University of Louisiana at Lafayette, says JPMorgan (JPM) earned $907 million on the Madoff account between 1986, when Madoff MOREColin Barr - Feb 28, 2011 1:44 PM ET
Three years after the financial meltdown started, bank watchdogs are promising taxpayers will have their day in court.
The Federal Deposit Insurance Corp. said Tuesday it has approved lawsuits targeting 109 former directors and officers of failed banks in actions that seek $2.5 billion in damages.
But don't celebrate the righteous legal offensive just yet. So far, despite the obligatory talk of a wave of bank failure lawsuits, the FDIC has actually filed MOREColin Barr - Jan 4, 2011 4:43 PM ET
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