Was Wall Street asleep at the switch?

images-6.jpegOver the past few days, most of the large Wall Street firms have filed their 10-Ks for 2007, which was kinder to some, including Goldman Sachs (GS) and less so to others, like Morgan Stanley (MS). So we wondered how often and to what extent the various firms would blame their woes on the subprime crisis and how those results compared to the 2006 crop of 10-Ks. The results weren’t that unexpected: Morgan Stanley, which has already written off over $9 billion, dipped into the subprime well more often than the others. The first number is how many times it was mentioned in the 2007 10-K and the second number is for the 2006 filing. Here’s the run-down:

  1. Morgan Stanley: 83 1
  2. Lehman 37 3
  3. Bear Stearns 22 1
  4. Goldman 14 2

But what’s really surprising here is that given the scope of the problems in 2007, the issue was mentioned so infrequently in each of the company’s 2006 10-Ks. To go from 1 mention to 83, as Morgan Stanley did seems more appropriate for a small bank from Podunk, as opposed to a Wall Street powerhouse. After all, as we footnoted yesterday Lennar (LEN) didn’t have any problem in its 2006 report suggesting that the subprime situation was likely to get worse. So why were these big Wall Street firms seemingly asleep on the job?

Of course, we’re still waiting for Citi (C) and Merrill (MER) to file their 10-Ks. That ought to make these numbers look mild indeed.

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