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Morgan Stanley Profits: The Story on Risk Goes Both Ways
The NYT noted that one factor depressing Morgan Stanley's profit last quarter was its improved credit standing, which increased the market value of its debt. The NYT implied that this was a peculiar accounting rule.
The rule may be peculiar, but it goes both wars. In prior quarters, Morgan Stanley increased its profits (or lowered its losses) by writing down the market vale of its debt as its credit quality deteriorated.
--Dean Baker
COMMENTS (6)
typo in 2nd paragraph? Happy 4th!
Posted by: bailey | July 2, 2009 8:55 AM
What I take from the article is that while Morgan Stanley is being realistic about its losses and shunning risk, others such as Goldman Sachs may be continuing risky strategies and overvaluing their assets to give paper profits - the kind of thing which caused the problems in the first place.
Posted by: skeptonomist | July 2, 2009 9:20 AM
Dean, you Must have been in a hurry with this post..
wars = ways
vale = value
Even so you make a good point, as you usually do.
Posted by: Bobby | July 2, 2009 2:41 PM
As the Congress and Administration hash out the role of the new "systemic regulator" issues like financial firms profiting from accounting treatment of own downgraded debt needs to be examined... this is one of the famous "gaps" in the regulatory framework...
Global regulators are trying to address these issues too... it's complicated...
We are building an open source wiki, called Riski, to help Congressional staff and others wade through these issues...
http://freerisk.org/wiki/index.php/Systemic_regulator
Join us at Riski!
Posted by: Cate Long | July 2, 2009 3:49 PM
Until Dean and the rest of anyone with power confronts the power of GOLDMAN SACHS(YOU), nothing will change in government, Obama is nothing but a FACILITATOR to GS. Like I said before, they are PUSHING AND SALIVATING for "Cap & Trade", why do you think they are the MAJOR FORCE behind it? I can't believe how the media, except Rolling Stone, are COWARDS to not confront the CARTEL of GS. link>
http://www.rollingstone.com/politics/story/28816321/the_great_american_bubble_machine/print#
Posted by: Gordon | July 3, 2009 1:20 PM
Dean- until you& others voice your opinion on the Goldman Sachs Cartel, & their incestuous relationship in government, the American people are screwed. Here's the latest on Goldman controlling 75% of all NYSE trades in March at a 80% SUCCESS RATE, and making $100 MILLION PER DAY ON TRADING USING GOVERNMENT STIMULUS. How long are you and others going to ignore their power over commodities and the economy?
http://www.dailykos.com/storyonly/2009/7/6/750420/-Breaking:-FBI-Arrest-Opens-Goldman-Sachs-Pandoras-Box
Posted by: Gordon | July 6, 2009 1:52 PM