Morgan Stanley Stuns With $9.4B in Writedowns

CEO gives up bonus in face of terrible performance
By Kevin Spak,  Newser Staff
Posted Dec 19, 2007 8:10 AM CST
The Morgan Stanley building is shown in this June 19, 2007 file photo in New York. (AP Photo/Mark Lennihan, file)   (Associated Press)
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(Newser) – 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.