Photo: Flickr/Lightroom Brasil
Wall Street’s reputation will remain “in the doghouse” as long as trading scandals continue to plague the industry, Morgan Stanley Chief Executive Officer James Gorman said.”Say you want to be out ahead of it and give a lot of speeches and talk about all the good we’re doing,” Gorman said today at an industry conference in New York.
“And then some trader does some stupid thing like this guy at UBS did and he’s in jail and all bets are off,” Gorman said.
He was referring to Kweku Adoboli, the UBS AG trader convicted of fraud this month in the largest unauthorised trading loss in British history.
Americans’ confidence in U.S. banks fell to a record low of 21 per cent in June, with the percentage saying they have “a great deal” or “quite a lot” of faith in financial institutions about half that in 2007, according to a Gallup poll. Financial services and banking were the least-trusted industries in an annual survey released in January by Edelman Public Relations.
Traders at New York-based Morgan Stanley had too much latitude in the past, “what I call having an out-sized sandbox,” Gorman, 54, said at the conference, which was sponsored by the Securities Industry and Financial Markets Association.
“Until we can be really confident we’ve got discipline around the sandboxes, I think you have to be really careful not to be holier than thou,” Gorman said. “We’re going to be in the doghouse for a while.”
Morgan Stanley took a $9.4 billion write-down in 2007 on losses from mortgage investments, and Gorman said “I should be kicked out” if the firm ever has another loss like that one.
Wall Street bankers should likewise resist the temptation to feel sorry for themselves because many are getting lower pay, Gorman said.
“There’s not a lot of sympathy,” he said. “The rest of society is going through at least as difficult a time from a much lower starting base.”
Banks haven’t cut compensation enough when faced with falling profits, and “the industry is still overpaid,” Gorman said in an interview with the Financial Times published last month. Morgan Stanley will consider a new round of cost-cutting next year, and that could include lower pay, he told the FT.
The firm lowered 2011 pay of senior bankers and traders about 20 per cent to 30 per cent, and capped cash bonuses at $125,000. Gorman said in January that employees who were very unhappy with their pay should leave the firm.
Gorman is set to lose 2009 stock awards once valued at almost $2.9 million as the bank misses profitability and share- performance goals.
–With assistance from Michael J. Moore and Donal Griffin in New York. Editors: Steve Dickson, Rick Green