After Morgan Stanley, it's the turn of Bear Stearns. The investment bank reported its first quarterly loss ever in its eight-decade history on Thursday 20 December, another victim of the mortgage crisis that has swept markets across the US and Europe.

The turmoil has afflicted top Wall Street banks and small student-loan providers alike. Reported losses have topped $40 billion so far, but analysts say that figure could climb even higher.

Morgan Stanley, a larger rival of Bear Stearns, reported its own first-time multibillion-dollar loss on Wednesday, which forced it to sell a stake to a Chinese sovereign wealth fund.

For others, more pain is to come. Merrill Lynch, which has already reported losses, is expected to announce more next month. Goldman Sachs reported a modest profit on Tuesday, but its stock price is down on the fear that it could face pain next year too.

Bear Stearns said it lost about $854 million, or $6.90 a share, for the fourth quarter, compared with a profit of $563 million, or $4 a share, a year earlier. Analysts expected a loss of $1.82 a share. The bank also said it had written down $1.9 billion of its holdings in mortgages and mortgage-based securities, up from the $1.2 billion it had anticipated last month.

The news caps a disastrous year for the USA's largest underwriters of mortgage bonds. Beginning this summer with the housing slowdown, Bear Stearns is a prime example of how Wall Street's big bet on securities based on risky home loans went sour.

Many of its peers - including Merrill, Morgan Stanley and Citigroup - have announced far more in write-downs, but Bear Stearns draws much more of its profits from trading operations. Its fixed income unit reported a net loss of $1.5 billion, as compared to a profit of $1.1 billion last year.

Some of Bear Stearns's other businesses reported gains, but barely. Its equities trading operation reported a net revenue of $381 million, an 11 per cent drop from last year. Its investment banking business reported $205 million in revenue, a 44 per cent drop from last year, as lower fees from fixed-income underwriting cut into higher revenue from its financial advisory work.

The firm's global clearing services reported revenue of $276 million, a modest 2 per cent gain from the same time last year. Its wealth management business showed some of the same gains made across the industry, posting revenue of $272 million, up 10 per cent from last year.

Bear Stearns's return on equity, a measure of how efficiently the firm is using its capital in its own trades, dropped to minus 29.1 per cent, down steeply from 20.5 per cent last year.

In the face of disastrous results, Bear Stearns has said its management will not receive bonuses this year. Its long-time leader James Cayne has been the subject of much speculation on Wall Street this year.

After two internal hedge funds that had bet on home mortgages began to crumble, questions about Cayne's leadership are being asked. Reports that he was an occasional marijuana user and had gone golfing during the worst parts of the crisis have not helped.

Cayne fired his heir apparent and the man who oversaw those bad bets, Warren J Spector. This leaves Bear Stearns with an uncertain future, as Alan D Schwartz, who was co-president alongside Spector, comes from the firm's investment banking side and is less familiar with its core trading operations.

The hedge funds are continuing to give the investment bank headaches. Ralph Cioffi, the man who managed the funds, left the firm last week amidst investigations into whether he improperly withdrew money from those funds before they collapsed.

The investment bank has lost so much capital that Bear Stearns formed a partnership with China's Citic Securities, in which the two firms swapped shares. It is a reflection of how weak Bear Stearns has become.

But the deal was nowhere near as drastic as others' measures to shore up capital. Morgan Stanley on Wednesday announced the sale of a $5 billion stake to a Chinese sovereign wealth fund, while both Citigroup and UBS have made similar deals with the Dubai and Singapore governments.