Morgan Stanley Stuns With $9.4B in Writedowns

Morgan Stanley, the nation's second-largest investment bank, lost $3.59 billion this quarter, its first loss ever, after taking a whopping $9.4 billion in writedowns on mortgage-backed securities. CEO John Mack, who promised to give up his 2007 bonus as penance for the losses, also announced a $5-billion cash infusion from China Investment Corp., the investment arm of the Chinese government, for a stake of 9.9% of the company.

The writedown knocked Morgan Stanley revenues to negative $450 million—analysts had expected a positive $4.23 billion. “This quarter is deeply disappointing,” said Mack, promising to right the ship and calling the writedowns “isolated losses by a small trading team.” But not everyone was persuaded: “It’s going to get worse before it gets better,” said one investor. (More Morgan Stanley stories.)