Despite the fact the financial services industry remains in flux, Morgan Stanley’s top executive said his company remains committed to buying the rest of Smith Barney.
James P. Gorman, the Wall Street giant’s president and chief executive officer, said during a presentation at the Securities Industry and Financial Markets Association’s annual meeting Monday that Morgan Stanley plans to buy the next 14% of Morgan Stanley Smith Barney as soon as May 2012.
“We are intent on buying [the rest of the assets] as soon as we can,” Gorman said.
Gorman said the Morgan Stanley Smith Barney deal, which was consummated last year "was an extraordinary opportunity. ... It was the phoenix that rose from the ashes" of the financial crisis.
Gorman said Morgan Stanley is a firm in “constant transition” but expects it will remain focused on capital origination and distribution. He said it is not interested in being a full-service financial insitution. Despite some industry trends, he said the company won’t be running credit cards, handling retail deposits or offering property and casualty insurance.
Gorman, who became Morgan Stanley’s top executive in January, said he thinks financial services companies that get too large shouldn’t be able to rely on government assistance in order to survive.
“Institutions should be allowed to fail no matter how big they are,” he said.
Gorman, who made his comments during a 45 minute “interview” with Charlie Rose at a morning presentation that kicked off SIFMA's annual conference in New York, said regulatory reform, including the Dodd-Frank Bill and Basel III, have provided necessary “clarity about what a company can and can’t do” and are “essential” for an economic recovery.
Gorman said regulatory reform has left the financial services sector with a “galaxy of regulators.” He said he thinks the industry would be well-serviced by adopting a systemic regulator as the Dodd-Frank Bill has laid out.
Despite the regulatory uncertainty and the economic malaise, Gorman said he remains confident even after the industry has gone through the “mother of all shocks and the mother of all regulatory reform.”
“The whole system … needs some patience,” he said. “We need time to build capital and build buffers. … And we have to do all of this in a culture where patience isn’t highly regarded.”
From the financial downturn, Gorman said he gleaned two very important lessons: Leverage is a “killer,” and “liquidity is essential.”
Gorman said regulators in Washington need to begin “imbedding confidence” in the culture in order to really spur an overall economic recovery.