Top Firm Posts First Loss In History, Boss Takes No Bonus

Breaking News - Just one month after Morgan Stanley announced that it was writing-down $3.7bn in subprime and related assets, the firm has shocked the market by posting it first quarterly loss ever - after taking a massive additional write-down of $5.7bn. Morgan Stanley's fourth-quarter loss from continuing operations was $3.59bn.

The firm has sold a $5bn stake to China Investment Corp to beef up its capital. Firm CEO John Mack, who is forgoing a bonus this year, said that 'the writedown Morgan Stanley took this quarter is deeply disappointing - to me, to our colleagues, to our board and to our shareholders. Across the firm, we have moved aggressively to make the necessary changes, and losses by a small trading team in one part of the firm should not overshadow the momentum we see in virtually all of our other businesses'.

If there was ever any thoughts that the subprime contagion was now under control, the Morgan Stanley news will dispell them. Where's the next shoe gonna drop ?


'All these numbers are nothing but hot air ! Unless you have the ability to carry out loan-by-loan analysis on each piece of securitized or repackaged asset (that should cover all ABS, MBS, CLOs and CDOs), there is no way anyway can place an 'accurate' value across whole portfolios. Big write-downs, however, are actually less scary than smaller numbers. Big numbers may look bad, but probably also means that the pricing folks are being conservative about the underlying value'.

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