Morgan Stanley's Gorman: Chance of another financial crisis 'close to zero'

“The way these firms are managed, the amount of capital that they have, the amount of liquidity that they have, the changes in their business mix -- it's dramatic," according to Morgan Stanley's CEO.
SEP 10, 2013
Morgan Stanley Chief Executive Officer James Gorman said there's almost no chance of another financial crisis like the one that endangered his firm five years ago. “The probability of it happening again in our lifetime is as close to zero as I could imagine,” Gorman said in an interview on the “Charlie Rose” show, citing steps by banks and regulators. “The way these firms are managed, the amount of capital that they have, the amount of liquidity that they have, the changes in their business mix -- it's dramatic.” Maybe there won't be another crisis, but markets will always be volatile. How can you convince clients to stay the course? Morgan Stanley borrowed more than $100 billion from the Federal Reserve, received $10 billion in rescue funds from the U.S. government and sold a $9 billion stake to Japanese bank Mitsubishi UFJ Financial Group Inc. to survive the 2008 credit crisis. Since then, the New York-based firm has increased capital and liquidity and bought retail brokerage Smith Barney from Citigroup Inc. to rely more on a steady-fee business. Similar steps taken by other large U.S. lenders to change their business offerings and improve their financial ratios have helped secure the health of the banking system, Gorman said. Banks also face increased scrutiny both from regulators and their own management and board of directors, he said. “The largest financial institutions in the U.S. are as healthy now as they have ever been,” Gorman, 55, said. “Dramatically healthier.” While Gorman said Wall Street banks should've had stronger clawbacks of bonuses in the 2008 crisis, he doesn't agree with assertions that executives should have gone to prison for their roles in the collapse. “There's a difference between incompetence or mismanagement or poor judgment or excessive risk taking from actually breaking the law,” Gorman said. “There's nothing I've seen that would suggest that any of the major participants in the financial crisis should be in jail for their actions.” (Bloomberg News)

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