Morgan Stanley joins the multi-billion dollar loss party

Keeping up with the Joneses.

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.

Meanwhile, $33 billion (yes, billion) of the now infamous "SIV" securities (the slices of debt based on the questionable subprime loans) has been downgraded by Moody's. The once high-flying SIV market has dried up practically overnight.