Morgan Stanley Chief Executive Officer James P. Gorman said he doesn’t see evidence of market bubbles developing and that investors should celebrate when the Federal Reserve starts to reduce extra support to the economy.
“There’s a lot of robustness,” Gorman said today during an interview on Bloomberg Television with Erik Schatzker. “The indices have obviously rebounded tremendously, but from very low levels.”
Gorman, whose New York-based company runs the world’s largest brokerage, was responding to remarks by BlackRock Inc. CEO Laurence D. Fink, who said Oct. 29 that the Fed’s effort to boost the economy by holding down interest rates has fueled “bubble-like markets.” The Standard & Poor’s 500 Index has risen 23 percent this year and set a record high the day Fink spoke. His firm is the world’s biggest money manager.
While the Fed’s program of bond buying has created “a flood of money” in the debt markets, “it’s been necessary to get this country back in balance,” said Gorman, 55.
“The reason they’re keeping it in place is because the economy is not growing and the economy is not doing what it’s supposed to do, which is creating jobs,” Gorman said. Reducing the central bank’s $85 billion in monthly bond purchases would mean employment is back to where it should be, he said.
The Morgan Stanley chief said his priority is getting the firm’s capital into “prime shape.” He’s also positioning the company to create enough earnings for incremental stock buybacks, he said. The bank said in July it will repurchase $500 million in stock after receiving no objections from the Fed.
“We have been very conservative the last several years relating to capital and capital management, and at times we’ve been criticized for that, for being too conservative,” Gorman said. “We’ve just started that program, so we’re going to take a very balanced approach here.”