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HomeDid Morgan Stanley’s John Mack Just Get ‘Shot?’
Posted by Larry Doyle on September 10th, 2009 7:42 PM |
Why would John Mack step down from his role as CEO at Morgan Stanley? Mack is widely regarded as one of the most competitive, if not cutthroat, individuals on Wall Street. I find it very hard to believe that he is stepping down because he just turned 65. Morgan Stanley is not the U.S Post Office.
Morgan Stanley has been ridiculed for not taking greater risk within its trading division over the last 6 months. In the process, Morgan Stanley has lagged its main rival, Goldman Sachs. What did Mack do to address this problem? He recently hired Jack Demaio, a highly regarded markets pro with whom Mack worked during his short tenure at Credit Suisse. So what happened? Why is Mack stepping aside? I think in true Wall Street fashion, he may have been pushed out, or — in Wall Street parlance — he just ‘got shot.’ Why? What have we learned and what do we know?
After Mack left Morgan Stanley in 2001, he was headed to work at Pequot Capital, a large hedge fund run by the legendary Art Samberg. In the midst of his transition to Pequot, Mack was thought to have been involved in providing inside information about Microsoft to Samberg.
Bloomberg addressed this story on May 28th in writing, Pequot Capital to Shut Amid SEC-Insider Trading Probe:
Arthur Samberg, once the world’s biggest hedge-fund manager, said a federal insider-trading investigation is forcing him to shut Pequot Capital Management Inc. more than two decades after starting its first fund.
“With the situation increasingly untenable for the firm and for me, I have concluded that Pequot can no longer stay in business,” Samberg wrote in a letter to clients yesterday. Pequot oversees $3.47 billion, according to a May 15 regulatory filing, down from $4.3 billion in November and $15 billion in 2001, when it was the top-ranked hedge-fund firm by assets.
The U.S. Securities and Exchange Commission in January resumed a probe into whether Samberg’s funds illegally profited in 2001 by trading on inside information about Microsoft Corp., people familiar with the matter said at the time. That was about a year after the agency told Samberg and Morgan Stanley Chief Executive Officer John Mack they wouldn’t be accused of wrongdoing related to insider trading.
So John Mack stepped down because he is soon turning 65? Yeah, right!! If you believe that, can I interest you in some toxic mortgage assets priced at 90 cents on the dollar? I think there is real value there!!
In my opinion, ‘Mack the Knife’ getting shot is an indication of the SEC flexing its muscle.
LD
John Mack Almost “Comes to Jesus”
Posted by Larry Doyle on September 30th, 2009 11:22 AM |
Wall Street has never been known to embrace humility. The rough and tumble world of ‘the street’ ultimately prizes profit over principle. Not that the titans on Wall Street would ever admit it, but make no mistake, Wall Street was and always will be about one thing…the bottom line. Nobody was more aggressive in pursuing those bottom line results than Morgan Stanley’s John Mack. His moniker “Mack the Knife” speaks volumes about his ruthless nature and aggressive cost-cutting to drive results.
Against that backdrop, I find it particularly interesting to see Mack present a fairly introspective interview with Bloomberg’s Judy Woodruff. All other assertions aside, Mack was recently unceremoniously pushed aside at Morgan Stanley. As I watched this short interview a few different times, I sensed a man entering a confessional as he tries to ‘come to Jesus.’
Mack initially provides insights on the following:
1. his view that the U.S. and European economies will have a long, slow recovery
2. his view that emerging economies will rebound in stronger fashion
3. the need for a systemic risk regulator on Wall Street
4. the need for one global financial regulatory system with one set of rules
5. the need for clawbacks in the Wall Street compensation process (clawback meaning the ability for the firm to pull back compensation from employees)
6. he admits that Wall Street needs to change. He tries to provide a mea culpa by offering an explanation that Wall Street firms tried to compete with private equity funds and hedge funds by developing those businesses internally. At this juncture in the interview, I felt that he was almost about to say, “Dear Lord, we lost our way and our moral compass. Please forgive us.”
Mack has been humbled both inside Morgan Stanley and across Wall Street. This Bloomberg interview exemplifies how “Whoever exalts himself shall be humbled; and whoever humbles himself shall be exalted.”
LD
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