Morgan Stanley agreed to pay $3.2 billion to end a joint federal-state investigation into its handling of mortgage-backed securities, the fourth deal to be struck in a probe of the big U.S. banks' role in the subprime mortgage meltdown and the financial crisis it spawned.

The settlement, announced Thursday by federal and state officials, includes $550 million in cash and other benefits for New York, on top of $2.6 billion in payments previously disclosed in a regulatory filing.

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