Top Firm Said To Be Staring At Massive $5.4bn Loss

The Wall Street Journal reports that Morgan Stanley has told investors that it expects to make a 61% loss (or $5.4bn) on investments made by firm property unit MS Real Estate Fund VI International.

According to the newspaper, the losses are said to have come from investments in the European Central Bank's Frankfurt HQ, a development project in Tokyo and involvement with InterContinental hotel properties across Europe. The likely loss is described as the biggest in private-equity real-estate investing history.

In the meantime, Bloomberg reports that the Financial Crisis Inquiry Commission is zeroing in on the $14bn losses that Citi incurred by using 'liquidity puts' when selling mortgage-backed debt. The puts allowed clients to sell back the securities to Citi at par, causing massive losses.

Former Citi CEO Chuck Prince told the Commission last week that he was unaware of the risks associated with these instruments, which were clearly created in the mistaken belief that US housing would never fall off a cliff. Citi traders are said to have viewed the likelihood that any client would use the puts as so remote, that no-one bothered to tell senior executives about them.

Finally, Reuters reports that JPMorgan Chase has posted higher-than-expected Q1 earnings. Net income came in at $3.33bn, on strong trading revenues.

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