From the NY Times article:

“It also reported $2.3 billion in losses tied to the way banks must account for their debts. Banks record losses as their credit spreads improve, because they are deemed more likely to pay off all their debt. As executives at Morgan Stanley and other banks point out, this is actually a sign that the financial industry is returning to health. But Morgan Stanley executives said their bank was suffering most from this accounting rule because the bank’s spreads were among those that ballooned most during the crisis.”

That “loss” accounts for more than their total net loss; however, it isn’t a real loss because it does not in any way imply that Morgan Stanley now owes its debtors any more money than before. It still strikes me as odd to claim profits/losses from the changing value of one’s own debt as the only way such profits/losses could ever be realized is if the company were to default. Apparently, they are all required to do this under current rules.

I think you need to take a primer on what VaR is and how it’s calculated. Not that I know that much, but as far as I recall:

a) VaR is measured by putting current positions (I defer to DaveS and others on when they’re booked) vs historical data – so the more volatile the markets were in the underlying set of historical data, the higher VaR will be. So, given how volatile the last two years have been, it’s entirely possible that current capital deployed has dropped even as value at risk has increased.

b) VaR is a statement of how much money can be lost. It doesn’t measure the potential positive return on the capital being put at risk.

In other words, VaR is pretty much useless for the analysis you’re trying to do.

Fortunately for your readers, that’ll be no reason for you to stop slandering Goldman.

VaR is not calculated continuously; it’s at a certain time of day, usually the tail end (it can be done overnight in time for execs to see it the following morning). So what this might mean is that MS is taking on “more risk” with whatever positions it holds overnight. But it gives us no sense of what banks are doing during the day.