Morgan Stanley on Wednesday said it has suffered a $3.7 billion loss stemming from its U.S. subprime mortgage exposure, which it expects will reduce fourth-quarter earnings by about $2.5 billion.
The Wall Street investment bank said the loss occurred in September and October, and might change before its fiscal quarter ends this month.
It attributed the loss to deterioration in capital markets, which was triggered in large part by the struggles of thousands of homeowners to keep up with mortgage payments. Morgan Stanley said markets may remain unsettled for several quarters.
Merrill Lynch said on Wednesday its total exposure to risky collateralized debt obligations and subprime mortgages is $27.2 billion, or about $6.3 billion more than what the company disclosed late last month.
Merrill's larger figure is mostly because of a deeper level of disclosure surrounding its banking operations. For the first time, the world's largest brokerage disclosed $5.7 billion worth of exposure to U.S. subprime mortgages at Merrill Lynch Bank USA, a Utah-chartered industrial bank, and Merrill Lynch Bank & Trust Co., a full-service thrift.
From the AP:
Losses in AIG's investment portfolio, credit-swap portfolio and mortgage-insurance business added up to about $1.4 billion, and caused net income to fall by 27 percent compared with last year's third quarter.
Back in August, AIG called exposure to subprime debt "minimal." On Wednesday, it maintained that despite some losses due to mortgage-backed bonds, its exposure to the debt remains "high quality," with "substantial protection."
Overnight an additional $11.4 billion in losses was announced. The figures are almost becoming mind-numbing.