Shareholders contemplating Bank of America's (NYSE:BAC) third-quarter earnings are likely reacting with one word: "yuck."

The investment banking division of the bank -- which includes capital markets, advisory services, business lending, and treasury services -- was absolutely miserable. Net revenue for the segment was down 44% over the prior year, and the segment's net income, which accounted for more than a quarter of Bank of America's total net income in its third quarter of last year, fell an astonishing 93% to $100 million.

Pretty much everything that could go wrong did go wrong in that segment. Most notable of all were the capital markets and advisory services, which managed to produce a negative $184 million in revenue. These guys might even make Bear Stearns (NYSE:BSC) look good. And what did Bank of America have to say for itself?

"Unprecedented market disruptions impacted trading results."

Wouldn't it be great to just once catch a "we" in a statement like that? Something like "our hedges were not adequate and we were unable to adjust to changing market conditions quickly enough." If you were to ask Goldman Sachs (NYSE:GS), they might tell you that the recent market conditions were great for business. Of course, Goldman isn't immune from exaggerating how unprecedented the market conditions are, either -- over the summer, its CFO claimed an amazing statistical feat had taken place.

To me, this is simply the ugly rear end of risk. Investment banks and the investment banking divisions of larger banks have been cranking up the dial on risk over the past few years, and it has made them look like cash printing presses. The higher returns, though, come with the specter of potential big losses, which they are reaping now -- with the exception of Goldman, of course, which has a bunch of freakish traders working on its behalf.

So let's go ahead and can all the "we're an unfortunate victim of circumstance" talk. The bottom line is that many of these firms -- whether Bank of America and Bear or Citigroup (NYSE:C) and Merrill Lynch (NYSE:MER) -- just stuck their hands too far into the cookie jar when times were good and haven't had the reflexes to get them back out before losing a finger or two.

More quick-taking Fools:

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