Morgan Stanley's Gorman: Bernanke's Been Phenomenal

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July 18 (Bloomberg) -- Morgan Stanley CEO James Gorman discusses Federal Reserve monetary policy with Erik Schatzker on Bloomberg Television's "Market Makers." (Source: Bloomberg)

Year, leading your peers.

It almost looks too easy.

Is this the calm before the storm?

This is reflective of a recovering global economic picture.

I may be in the minority on this view, but i think the u.s. is likely to surprise on the upside . i think the markets aren't dissipating that.

--there are pockets of real interest around the world.

The banks that are in the middle are managing flow of capital, helping make loans.

There is been an enormous boom in refinancing mortgages.

You have been bullish on the prospects for the u.s. economy for quite a while now.

And you have been out in front of expectations and reality has caught up with your view.

What should the fed do?

I think chairman per nike has done a phenomenal job.

-- bernanke he has done a phenomenal job.

The fed has played this well.

They need to see concrete signs of recovery, at which point we should all celebrate the fact that rates are rising.

It is a good sign.

When rates rise, it is a reflection that the economy is recovering.

Ultimately it is an adjudication of the strength of the economic platform propping this country up.

Is the market right to be pricing in less stimulus now?

If it was so easy, everyone would have much easier lives.

I don't know if the timing is right now or not.

The chairman and board have been very patient and have wanted to see real, concrete evidence.

I think the market may be a little ahead of us.

If you are sitting on the fomc, would you be voting to start tapering the third quarter?



You need to see enough concrete signs.

The chairman laid out 6.5% unemployment as the target.

The fed is one of the country most important bank regulators.

They have a lot to do with your business.

And they with the other regulators have introduced a new requirement for you, the leverage ratio.

How do you feel about it?

It is a continuation of trying to find the right position for this industry, which is the back on of any economy, financial industry -- make it safe and stable, at the same time leave it in a position where he can drive economic growth.

Does this new ratio mean that you will not be able to return as much capital back to your shareholders as you wanted to before you found out about it?

Not necessarily.

Our capital plans will reflect the creation of earnings.

That puts us in a different position, which is why we received approval for a $5 million share buyback from the federal reserve going forward.

A happy surprise for your shareholders.

Yes, and a necessary step.

The most important thing was, get the wealth management deal done with the capital required then we will start talking about financial management, which is buybacks and dividends.

This was a necessary step.

It is evidence of the stability of the institution.

What about the potential for unintended consequences with regulation?

The ceo of blackrock told me last week that the leverage ratio, because of the way it treats capital differently, could force some banks to sell treasury holdings because it no longer is attractive from a with grated standpoint.

-- risk weighted standpoint.

Any securities would be exempted, as they were under the volcker rule.

They have been very thoughtful about thinking through potential exemption, whether it be treasuries, and ensuring that there is no disruption to the market.

Let's get through the coming.

-- coming period.

The banks will manage with whatever cards they are dealt.

Has the successor been considered for ben bernanke, and do you have a preference?

I don't. i know some of them quite well, and i know all of them a little bit.

What is great is that we have a great group to draw from.

How much of a difference does it make to someone in your position, and your clients, who sits in that seat?

It makes a big difference.

Look at overtime, there is been a great chairman -- chairman per nike -- bernanke --and there have been others that are less great.

What the market is looking for is a consistent approach on the path the fed has been on for the next.

Of time -- period of time.

There are questions about the consistency of the fed.

It does appear to be affecting the market.

Does bernanke's commitment to transparency end up confusing people?

I don't think so.

I think he has been very clear.

The best indication of economic recovery or stability is unemployment at 6.5%. you draw your online at which point the fed -- does it taper when it hits the moment?

You draw your own point.

You have a very privileged view of investment behavior by virtue of your institutional and retail brokerage business.

How our clients reacting, particularly in wealth rotation?

Are people rotating out of fixed income?

We saw some rotation towards the end of the second order, when there was movement in the bond prices.

I have been surprised.

The mood of the client is very balanced, very thoughtful, bordering on cautious.

There is no irrational exuberance in the market lace from the retail investor at this point -- marketplace from the retail investor at this point.

Is the money that has been parked on the sidelines coming off?

What do people want to buy?

We have good product in the system, that product is bought.

There is no chasing returns at this point.

If we cbs and p and the dow to solidify -- see the s&p and dow solidify, all of these things, we will see stronger investor activity.

This text has been automatically generated. It may not be 100% accurate.


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