The subprime mess is turning out to be a minefield for investment banks.

The latest casualty is Morgan Stanley, the investment banking house, which took a staggering $9.4 billion charge for the 4th quarter due to investments in subprime instruments. The company has now taken close to $11 billion in write-downs due to these investments.

John Mack, its CEO, fell on his sword and accepted responsibility for the firm’s big loss. Imagine that!

So unusual has it become for executives and politicians to accept responsibility for anything that happens on their watch, that one almost feels sorry for Mr. Mack forgoing his bonus this year. He’ll only take home about $800,000 this year in salary, according to the New York Times.

Because of the tremendousness of this loss, Morgan Stanley became yet another of America’s golden names that was forced to sell off a piece of itself in order to restore the flooring in its financial house. In this case it was an investment arm of the Chinese government that bought a $5 billion stake.

Citigroup sold a stake to Dubai to shore up its finances as did UBS to Singapore. All of these governments are acting selflessly, forgoing seats on the boards of the companies in which they’ve invested billions. (It’s not often that one sees the words ‘government’ and ‘selflessly’ in one sentence, but hey, who am I to question the integrity of these sovereign states?)

The Times quoted a ditty which it said was making the rounds on trading floors lately. It goes like this: “Shanghai, Dubai, Mumbai or good-bye.”

Funny, huh?

What’s becoming clear amidst the smoldering ruins (and this is before all the bombs have exploded) is that no one knew–with the exception, perhaps, of Goldman Sachs and Bank of America–what they were doing when it came to these exotic and incredibly complex investments backed by subprime mortgages.

And what’s also becoming clear is that no one particularly cared, especially those regulators charged with protecting consumers and the investing public.

The Times reported in a front-page story on Dec. 18: “Fed and Regulators Shrugged As the Subprime Crisis Spread.”

Individual regulators at the Fed or the Treasury, as it turned out, warned their agencies but were brushed off. And some of them say they were brushed off by none other than former Fed Chairman Alan Greenspan. The Times interviewed Greenspan, who it said, “vigorously defended his actions, saying the Fed was poorly equipped to investigate deceptive lending and that it was not to blame for the housing bubble and bust.”

Yet, the Fed does have those powers under law.

But it was not the only agency that was sleeping. The Office of the Comptroller of the Currency also turned a blind eye.

One thing that is bringing me some year-end cheer at the end of a dismal year is the unraveling of Mr. Greenspan’s reputation as the financial wizard whose magic created the country’s prosperity.

Funny how little of the financial pain is Mr. Greenspan’s fault but how much of the good times were due to his oversight and acumen. But perhaps it was his doppelganger that approved of the Bush administration tax cuts that so egregiously pumped up the nation’s deficit. And perhaps it was this same double that did nothing while the housing market started to burn.

But I don’t think it was his double that took a multi-million dollar advance on his book, which lays off on others many of the unpleasant happenings that occurred on his watch. No, that was Mr. Greenspan himself, laughing all the way to the bank.