Gorman: Better Year for Fixed Income, Commodities

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Jan. 22 (Bloomberg) -- James Gorman, chief executive officer of Morgan Stanley, discusses his outlook for the bank and the financial-services industry from the World Economic Forum’s annual meeting in Davos, Switzerland on Bloomberg Television’s “Market Makers.”

Here we are, day two.

It is beautiful out there, and it is about to get hot in here, speaking to the most influential people in the world.

We will start with one of the most influential men in the banking world, james gorman.

Great to see you again.

Great to be here.

It is unbelievable.

The sun is shining.

Let's make some news, shelley?

You got to town last night.

You have been able to hear a bit about what people are saying.

Talk about what people are saying, trust -- five years after the financial crisis, how is it that you think people trust banks so little?

I am told we are the second least.

Fortunately, we still have congress.

News reporters are third.

In all seriousness, this is the most damaging financial crisis since the depression, and maybe well before that with all of the home foreclosures, bank failures, and the impact that had on the global economy.

It was devastating.

It takes a long time to recover the trust.

It is not surprising.

Is the industry not doing enough?

The industry is doing a lot.

Like what?

You need strong institutions, so they are recapitalizing, cutting leverage.

They started shedding businesses that were at the roots that got banks in trouble.

Let's get more basic than that -- america does not understand when you talk about shedding proprietary businesses and lowering leverage.

Popular opinion is just so negative.

What is your shed is he to tell the great american banking story ? i do not know if you can tell a story to an audience that is not ready to listen.

We have to get employment to the states.

If people are in jobs, they are much more willing to listen about what you will do for them, and for better or worse, we had the financial crisis.

Let's get the economy growing.

One of my top 10 goals, no new mistakes.

Let's not repeat what caused us to get into this position.

On other issue is inequality, wealth inequality.

Where does james gorman stand on that issue?

It is legitimate.

Look at the minimum wage since 1950, inflation adjusted.

It is terrible.

We are clearly creating societies where we have large groups of haves and have- nots.

It was expressed by the public in the financial crisis, sometimes in graphic ways.

Do we need to raise the minimum wage federally or is it find state-by-state?

It does need to raise.

I do not know if it is federal or state.

We have had a lot of competition for lower-level jobs that have either been outsourced -- i think it is time we adjust that.

Low-level jobs do not exist in your world.

You run morgan stanley.

You have traders sitting in mortgages, high yield, saying i want to get paid $5 million or i will walk.

How do you balance this?

We have 66,000 employees, and the number getting $5 million or more is a small number.

Of course, we want to keep them, but we have respect for great members all over the organization.

We have 20,000 people in support functions.

Thousands work as assistants to the brokers doing their business.

We care about all of them, not just somebody making millions of dollars.

That said, you have to pay competitive to what the job description is.

Does morgan stanley have an additional reason to care about inequality to the degree there are less of it, intentionally more clients?

You are in the retail business.

It is not a business issue.

It is a moral and society issue.

This is a broader, society issue.

How much do shareholders care about doing public good?

At the end of the day, shareholder say what have you done for me lately, why should i own morgan stanley?

Shareholders have choices, and a lot of companies participate in society, giving back.

And morgan stanley, we are proud we have established centers and three children's hospitals in new york, london and beijing had do you think that is why people buy morgan stanley?

No, but they value having moral standing.

Let me posit that it is a business issue -- so long as the income divide does not narrow, it fuels populism, that drives politicians and regulators to do things they -- about the things they perceive to be sources of inequality, for example, making.

I'm not an expert on what we should do from a public policy point of view, but i think it's time to take a hard look at the issue.

The fact that it is front and center at davos, with the corporate community, the business community -- we are having an open discussion.

Your job -- you spend your life on the defensive, defending the industry, dealing with regulators.

Do you wake up saying i want to be a positive force and i am always on the defense?

Why am i doing this?

You are watching a part of the job that i do not have, as i feel good about it.

We pulled off the largest merger in financial services the last 10 years and the largest merger in wealth management in history.

These are pretty on-the-offense activities.

I am proud of how our employees have pulled together.

We have had to do with the financial crisis, but we have put a lot of that behind us.

Do you start to feel like we need to be -- do we need to be in the financial business?

Morgan stanley has consistently ranked number 1, 2, or three in global investment banking, number one, or two in mergers and acquisitions -- these are phenomenal businesses.

The wealth management business is additive to what is a phenomenal investment bank.

At the same time, there are people, james, that obsess over the size of your fixed income business.

What do you say to those people?

They had better get a life.

I love it.

There are a lot of things to worry about.

I worry about why there is not more snow in davos.

Listen, we are in the business of doing the right thing for our regulators, shareholders, employees, clients.

How do you then evaluate -- that is what we are talking about, some people take it to extremes, but how should somebody add value a your investment banking industry?

Against the other investment banks?

I think they evaluated pretty well.

We had a good and -- for our size institution, we had a good year.

We will never be a mega rate and foreign exchange business at the big, commercial banks are.

That does not mean we cannot have a strong fixed income commodities business.

Last year was a difficult year, absolutely.

That is not the end of the story.

Will this year be better?

I think this year will be better.

Would you see the biggest growth for morgan stanley in 2014? when economies are recovering, the first sector to come out of the recovery is financial services, and typically investment and asset management.

We have growth opportunity.

The equities business is doing great.

Mergers and acquisitions market is coming back.

Wealth management is doing great . frankly, for all of the heat on fixed income and commodities, they will have a better year in 2014. how about the heat you had to take for facebook?

After the fact, do you feel like standing up and saying "i told you so?" it feels like it was a dam good deal.

I would never.

I am sure you had a chance to look at the tape when you told me it was a disaster -- we did not do that.

That was the other guy.

Like i said in 12 months it would turn out fine.

I was wrong.

It was 15 months, and it turned out great.

The story about facebook -- forget the ipo -- it is an amazing company, an amazing piece of innovation created in america by some very creative, smart, daring individuals.

All hats off to them.

Does that mean you are a facebook user?

I do not use facebook.

I do not use social media.

It is dangerous.

What is going on with recruiting and retention -- why does it seem like wall street banks are trying to make life a little cushier for junior people?

Hugging the little bankers.

What did you call them, chubby kittens?

Chubby kittens.

This interview has taken a lot of different directions.

[laughter] it is the age-old question -- these folks get very well-paid.

Even the junior guys.

Even the junior guys for what they do, and it is not surprising it is very demanding.

There was a young man that passed away, which has caused everybody to step away and say we have to do this right.

Trucks are you doing the same thing, giving the guys we can -- are you doing the same thing, even the guys weekends off?

I am not sure that is the right example.

I am not sure how you stop working if there is a deal on.

If we are not managing the young folks properly, we need to deal with that.

Are young folks saying after two years in banking that i do not want to be in this business, because 5, 10 years ago they were happy to grind out 100 hours a week.

There was a pot of gold at the end of the rainbow.

I think people are passionate about it.

The hours have to be reasonable so they can have a lifestyle, otherwise they become

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


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