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Give John Mack a Hand

Posted by: Matthew Goldstein on April 22

Sure, Morgan Stanley’s worse-than-expected first quarter loss of $177 million is nothing to cheer about. And investors, in early trading, are beating up on the stock, pushing shares down 7%. But give Morgan Stanley CEO John Mack credit for putting out an earnings report that doesn’t try to hide the investment firm’s warts.

It seems much of the bad news at Morgan Stanley is tied to bad bets on the real estate market—both investments in residential and commercial properties. The firm posted a net loss of $1 billion on real estate-related investments in the quarter. That’s a particularly huge loss when you consider that Morgan Stanley lost $2.5 billion on its real estate investments for all of 2008.

Real estate, of course, continues to be a big black hole of losses for many banks. Goldman Sachs, for instance, reported a $640 million loss on “real estate principal investments,” in the first quarter. Goldman Sachs otherwise wowed the Street by reporting a better-than-expected profit of $1.81 billion.

But here’s the thing: with Morgan Stanley you can at least get some idea where the real estate losses are coming from and where future problems may still exist. How’s that? Simply, turn to page 17 of the 21-page financial supplement that Morgan Stanley published along with its earnings release. Morgan Stanley, like many other big banks, has been publishing a such supplement for years. The supplement offers a deeper dive for investors, analysts and business reports.

Goldman, as I pointed out yesterday, still feels no need to provide investors with such a detailed filing. The firm says it will provide more information in its 10Q, which may not come out for another few weeks.

I guess then we’ll just have to wait and see how much detailed information Goldman provides on its real estate losses.

Reader Comments


April 22, 2009 12:32 PM

The US government has adopted a policy of rewarding the dishonest banks and punish the honest ones. After the rampant frauds perpetrated by banks like Goldman and AIG, the Obama administration actually eased financial reporting requirements for these businesses.


April 22, 2009 03:50 PM

What, we should thank this guy for telling the truth? How low have we fallen?


April 22, 2009 04:30 PM

Q.: How low have we fallen?

A.: Very low. More precisely, very, very, very low.


April 23, 2009 12:33 AM

What do you expect from an administration whose highest accolade is that it is better than the Bush administration?

What we have is a bunch of bozos doing the limbo. Great music. Unattractive contortions.

Thank you for your interest. This blog is no longer active.



BusinessWeek's Adrienne Carter, Jessica Silver-Greenberg, and David Henry deconstruct the mysteries of high finance, Wall Street, and hedge funds for pros and ordinary investors. E-mail them directly if you've got tips about big deals, a hedge fund, or even securities industry gossip.

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