Gorman: We Are Matching Investors Needs, Desires

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Nov. 1 (Bloomberg) -- Morgan Stanley CEO James Gorman discusses the role of big banks with Erik Schatzker on Bloomberg Television's "In The Loop." (Source: Bloomberg)

Talked about today, the establishment of the morgan stanley institute for investing.

The cynic would say that initiatives like this one are nothing more than an attempt to burnish your firm's image and rehabilitate wall street's image . why are they wrong?

A cynic would be right if we had just thought of this today, but we haven't. we've had a sustainability group.

For a few years, we been involved in a lot of financing and lower income housing development and working with the communities around this country and the world.

Today we have crystallized it.

We are creating a special internship program with columbia business school where we bring students in for the summer to work with us.

We're matching investors' needs and desires to be investing in sustainably oriented companies.

It is a major ramp up from what we have been doing.

Is this a matter of morgan stanley lending its expertise and perhaps some of its talent, or is there capital involved as well?

It is putting money at work through our bank institute bank work program.

We are putting back into those communities as part of the cra process.

We control it out -- about 1.8 trillion dollars.

It is bringing intellectual capital around new products.

We think we can put $10 billion to work.

It is not corporate philanthropy?

No, it is doing the right thing, and meeting investor needs in the marketplace.

As a matter of principle, is warren buffett right that public companies should not be spending shareholders' money on causes?

It would be dangerous to second-guess warren buffett.

He is right on most things.

Every corporation has to reflect the values.

I don't think everybody should do the same thing.

We are clear about our desire and need to get back to our communities.

Let's go back to the cynicism for a moment.

There is a good reason for all the cynicism that persists around the banking industry.

The government is throwing some fuel on the fire.

Very aggressive tactics, very big demands of banks, most recently jpmorgan.

There are two views on the subject.

What the government is doing is right and justified, and the other that it is extortion.

I do not think it is quite that simple.

We have courts.

We have a legal system.

If you don't like what is being enforced on you, you have a right to take it to a judge and make yourself heard.

There has obviously been fallout from the financial crisis, a lot of investors and individuals were damaged from it, and this is the response to that.

Is it fair or reasonable?

That is for each company to figure out.

Is the crackdown on jpmorgan a sign of what is to come for other banks, including yours?

I'm not going to talk about another institution -- i'm asking you to comment on what morgan stanley might have to deal with.

We understand where we have different discussions with government and other agencies.

We do what we think is right for our shareholders and the other parties.

The problem in this particular case is the jpmorgan did not see it coming.

Jamie dimon said as much publicly on a conference call.

Does that change what you anticipate from the government?


i don't know what they saw or didn't. you would have to ask jamie diamond about that.

I care about what is going on at morgan stanley.

We have a clear view of what happened in the financial crisis and what our responsibilities are.

Let's talk about twitter.

You had a front row seat to facebook's troubled ipo.

We understand why that ipo was so troubled.

Is there any risk in your mind atwitter's ipo could be half the debacle that facebook's was?

Let's start with facebook.

It is interesting you refer to it as a debacle.

As an investor who might have bought the stock, it is a pretty good return.

You have to have an ironclad stomachs to be able to get here.

Hopefully investors have a long-term view.

Those who were trading in and out that day, if they were disappointed, that was their problem for not holding on.

If you had a long-term view about what kind of extraordinary company had been created with facebook, you could see the potential for that stock, and that's exactly what happened.

Is that the mine said should take going into twitter's ipo -- mindset people should take going into twitter's ipo?

Forget pricing on the day.

Reflect on the fact that ultimately, it has turned out well for investors.

We are innovating.

We are creating great companies with enormous value, and it is being done in this country.

It's a good thing for the economy.

As a matter of execution, do you believe that underwriters, exchanges, everybody who needed to learn a lesson has learned, and as such this will go more smoothly?

I don't think there was an underwriting issue.

Fair enough.

How about the exchanges?

I'm not going to talk about that.

We would like a cleaner opening.

Everybody, for the market's integrity, transparency, that would be a good thing.

Do you think we will get one?

I think we will get one.

The ceo of blackrock said that he is seeing bubblelike markets again.

Do you see bubblelike markets?

Not really, no.

I don't. i see the equity markets.

The s&p is trading at 1700 and change.

It is frankly not bubblelike relative to the year 2000, 2005, 1995. on the equity markets, no.

There's a lot of robustness.

The industries have rebounded tremendously, but from very low levels.

There has been a flood of money out there through the quantitative easing program.

It has been necessary to get this country back in balance.

I'm not sure i share that view.

Would you agree that the longer the fed keeps quantitative easing in place, the greater the risk of bubbles?

The reason they're keeping it in place is because the economy is not growing.

The economy is not doing what it is supposed to do, which is creating jobs.

We should all celebrate the day they start taping.

It means the fed, with all the resources they have, have a fundamental view that employment is back to where it should be, which is 6.5% or better.

You set a target for your firm of a return on equity at 10%. with all you have done this year, you have met your target for cost cuts.

You have met your target for risk weighted assets in's. why are we still stuck at 6%? we are below 5% last year.

If you look at the numbers, the trend is out front.

We did not say we would achieve that this year.

We are carrying lots of capital.

The combination of a firm which has returned to the canada position it was in, but in an environment where the markets have been pretty light -- position it was in, but in an environment where the markets have been pretty light.

To your knowledge right now, is there anything but fed approval constraining you from pursuing a bigger buyback, returning capital to your shareholders?

Is it something you would like to do as aggressively as possible?

I don't know as aggressively as possible.

This is where i separate what the regulators would think is appropriate and what we think is appropriate.

We are the toughest on ourselves.

We have been very conservative the last couple of years relating to capital and capital management, and it times we have been criticized for that.

Job number one is to get your capital base into prime shape.

Job number two is to position yourself for incremental capital buyback.

We're going to take a very balanced approach here.

Thank you for joining me at the columbia business school.

James gorman, chairman and ceo of morgan stanley.

Thank you so much.

We will return in two minutes here.


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