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Morgan Stanley CEO on Calls to Break Up Big Banks

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    Morgan Stanley CEO James Gorman on the importance of larger banks in the U.S.

  • Duration 7:26
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I want to just check Morgan Stanley we touched on it it is one of the biggest market gainers today the stock trading at a 52 week high.

After the firm delivered better than expected earnings blowing away Wall Street estimates this gain of about seven and a half percent.

Is the biggest one day gain in more -- seven months.

Let's get to the guy who runs the show.

Now not Charlie Gasparino sorry Charlie but Morgan Stanley chairman and CEO James Gorman -- Charlie -- what I don't run the show I'm here are -- -- obviously that wars are.

Regrets and a great quarter thank you thanks -- -- I go back a long way and you've been predicting this for -- -- that and we're gonna hit this point.

Where from that point done.

-- -- be pretty consistent you know that you guys were up and down in terms of earnings -- some issues.

You've hit that you you believe -- that you've hit that point where now it's gotta run the business and the business is profitable correct.

-- had the -- -- Charlie it's been the crisis was so -- We had issues before that denies have them with the whole I'm one in the mortgage pocket right.

So it's really been five years of both the sort of falling into the pocket and then -- -- way out of -- and in the middle of what we did this huge steel buying spent time -- a -- -- a position so we were doing stuff aggressively strategically.

The playing a lot of defense in fixing cleaning up.

Movie on rebuilding.

And I sort of felt I just feel like this is a pivot point.

And honestly the fourth quarter was good wasn't -- -- a lot still to go but this is a pivot point when now we focus some running a -- So much your business meaning it's been about Smith -- you're gonna assume all of their brokers right totally control -- -- Something like 181000 -- the biggest brokerage firm in America so much you business has to do with the small investor.

Yet we know the small investor is not really in this market in -- age -- they're out of -- a major way yeah how can you predict consistent earnings -- this is a pivot point when you know the small investor is a minute.

They're -- it's good question but that the the interesting thing is even with the small -- from the sidelines.

The business is showing remarkable resilience right so -- zero interest rates there.

Very little.

New equity being issued.

And very little investor confidence the market is showing great resilience but again -- our investor is we have we have -- -- but we also very -- -- and so we run.

We run the gamut.

I think you know I've watched the flows and I just feel like for the recovering US economy.

As investors 41 K plans are up right last twelve months significantly you think there's any -- point to get these small mr.

back in the market that's coming.

Around that's ago -- I don't know that there's a real moments that doesn't -- -- to -- what the what the big epiphany where everybody's his -- got a but I think it's just a growing sense of confidence we needed.

We needed Europe we need to Greece to stop looking like -- the whole country is on the rise.

We needed Europe to stabilize broil it we needed to Chinese.

Leadership transition -- happen.

And happens seamlessly we needed the election to be -- -- we needed the stock to the fiscal cliff resolution all of those things -- to happen.

Confidence is growing unemployment.

Is ticking down so I think it's it's more gradual she -- -- -- the agencies things the Morgan Stanley is a couple years ago people actually predicting your device like Morgan Stanley would not be there would have to merge -- but -- the earnings power.

Bomb thinks this is proof positive that that wasn't.

Right that you guys can remain independent you see ourselves independent for our future -- absolutely -- -- you know Europe a I don't know whether my campus today.

But thought of forty billion -- right.

Type back company we've 22% of by Mitsubishi bank and a signal third largest depository institution the world so.

We're now a very lied -- very connected global institution and you still.

Either number one and number two and emanate which is interest in a lot of people thought -- -- to score these emanate deal you need a commercial bank.

Attacks you don't obviously say you don't even have to let them which when -- -- these deals.

The question becomes then.

Okay why do we need big mega banks like JPMorgan.

Do you think we Needham and do you think congress at some point is gonna look at these institutions and say.

Jeez you know there's too systemically it's crazy let's break -- Yeah I don't subscribe to that futile if they may actually suit.

As smaller interests of ourselves and others vs the big commercial banks but I actually think it's flawed logic the biggest banks and well but not the US banks.

Right they Chinese Japanese.

The Swiss banks the French bank so a lot of big big banks in a straight why don't need big banks here in the US that are.

Yeah he helps systemically important systemically risky.

Do we actually need them well -- successfully as a percent of GDP the size of the -- largest banks in this country compared to.

Any of the major industrialized company countries in the world is -- OK so they're actually less systemically important.

To our economy.

Then Switzerland France Canada Australia Japan China you get -- on the list -- -- -- global corporations and companies like G they need.

Balance sheets decides what -- major banks have been ordered to support they've really -- is slowly so you guys you eat -- you don't I mean why would they just to all the business would JPMorgan said Morgan Stanley well resurrect there's a range of businesses he -- correspondent -- you've got trade financing a project finance ago commercial lending get.

If there's a whole range of business -- you think you could survive even if they don't break about.

Al survivability is not an issue we in the Chris and his -- how much we gonna -- and and how soon and I think the markets' response today reflects that but I just in defensive act competitor those.

And -- a bit of a push now about this whole break up the best I think it's dead wrong you think who actually do it.

I'd I I prayed and -- that we -- two I a much in would you pray do you think congress shall take it only did not and -- -- would make America less competitor headlight you don't think they'll take it up this is just Illinois.

-- take up the debate I don't think they'll -- reasonable people get through.

And debate as we've -- -- a series of these things illustrious they'll recognize it's a it's a spat.

An essential element of American competitiveness and there's actually no industrial logic for when you think this the -- really start happening.

Oh boy I think I think it's thought it started -- around him and I'm sure adopt boss for -- SA heading off to next week they'll be they'll be and losers going there to see you could say -- -- -- that happen it's sort of a well let me.

But if you that this is -- that -- National politics national economic politics report -- -- -- -- -- -- -- very talented -- the person at Morgan Stanley.

Mentioned as a potential -- to -- Jack -- Is she gonna take it.

-- -- -- -- I accounts I've no idea what's going on they all know was the -- is that as you said she's very talented.

I should talking about it not Ruth Ruth is my CFO -- -- her her obligation is Ed Morgan Stanley and I've got no idea what the future's gonna bring.

She's a very talented person we proud to have from the team I'm I'm delighted I picked a for the job a couple of years if you loser.

Wave -- -- great organization.

You know these organizations listen we we -- we'll move on at some point absolutely myself by criticism John have you don't you know well and and so -- where role at some point these are great institution basically Jack what.

To club I don't know empire Medicare and treasuries the guy's going to be trade no absolutely no bad I've got a person -- -- -- -- months of trust us so often.

Have a lot of respect -- -- enormously competent bright guy has the president's confidence.

Which is essential is incoming Treasury Secretary some look forward to working with him.

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