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John Mack · The David Rubenstein Show

• 0:02
  Speaker 1: In recent decades, one of the most important figures in
• 0:05
  Speaker 1: Wall Street has been John mac He led Morgan Stanley
• 0:08
  Speaker 1: for many years and led it through the financial crisis
• 0:10
  Speaker 1: of two thousand seven two thousand eight. John rose from
• 0:12
  Speaker 1: modest circumstances in North Carolina to become a dominant figure
• 0:15
  Speaker 1: in Wall Street for quite some time. I sat down
• 0:18
  Speaker 1: with John recently discussed his life story and also what
• 0:21
  Speaker 1: he sees as the future of Wall Street. So you
• 0:24
  Speaker 1: spent more than fifty years on Wall Street, and probably
• 0:27
  Speaker 1: the most difficult time was during this two thousand seven
• 0:30
  Speaker 1: two thousand eight procession where Morgan Stanley came close to
• 0:34
  Speaker 1: going under. Was that the most difficult time of your career,
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  Speaker 1: No question about it. I mean we were on the
• 0:39
  Speaker 1: brink of going out of business, and you thought you
• 0:41
  Speaker 1: had a good cash reserve for a while, but then
• 0:43
  Speaker 1: all of a sudden people started pulling cash out, your
• 0:46
  Speaker 1: cash reserves went down. How close did you come to
• 0:49
  Speaker 1: actually going bankrupt? Well, we were very close, David, to
• 0:54
  Speaker 1: the point that Tim Geitner it Fed was trying to
• 0:57
  Speaker 1: get us to sell to Jamie Diamond It's time, and
• 1:01
  Speaker 1: he kept saying, that's what I want you to do.
• 1:04
  Speaker 1: So I called Jamie and I said, look, Guitner's all
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  Speaker 1: over me. He says, you will, you will buy the firm.
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  Speaker 1: He said, I don't want your firm. I said, well
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  Speaker 1: go tell Geitner that and he said, John, if you
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  Speaker 1: forced me to do it, I wouldn't pay you two
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  Speaker 1: dollars a share. So that that made it easy on me.
• 1:20
  Speaker 1: I was not going to listen to them, and UH
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  Speaker 1: as a result, we called our board in and we're
• 1:26
  Speaker 1: thinking we're going to go out of business. At one point,
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  Speaker 1: you're on a phone call with Ben Bernaki, the chairman
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  Speaker 1: of the FED, um Hank Paulson, Secretary of Treasure, and
• 1:34
  Speaker 1: Tim Geitner, the head of the New York Fed, and
• 1:35
  Speaker 1: they say you should file for bankruptcy and you slammed
• 1:38
  Speaker 1: the phone down on them. Was that easy to do
• 1:41
  Speaker 1: for me? It was easy to do. I mean, thank god,
• 1:45
  Speaker 1: I left out some four letter words. I said, I'll
• 1:47
  Speaker 1: take the firm down first, and I hung up on him. Okay,
• 1:51
  Speaker 1: I can't tell you why I did it, cause my
• 1:53
  Speaker 1: gut it was the wrong thing to do. So now,
• 1:56
  Speaker 1: after your retirement, you decided to write a book. It's
• 2:00
  Speaker 1: a very good book. I've read closet and all in
• 2:02
  Speaker 1: about your life story. So how hard is it to
• 2:04
  Speaker 1: sit down and write about your life and go through
• 2:07
  Speaker 1: the good and the bad things that take you along
• 2:09
  Speaker 1: with a long time to do this. And do you
• 2:10
  Speaker 1: ever say why did I agree to do this? No? No,
• 2:14
  Speaker 1: I enjoyed sitting down and working with the person who
• 2:16
  Speaker 1: worked in me on the book. Look, I have a
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  Speaker 1: lot of memories, a lot of things that I did
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  Speaker 1: that that in talking with him, it came up of
• 2:25
  Speaker 1: other things that I had done. So I enjoyed it.
• 2:29
  Speaker 1: It was I got along really well my writer, and
• 2:33
  Speaker 1: Linda Coleman was just terrific and we had fun doing it.
• 2:36
  Speaker 1: So I enjoyed doing the book. So at the end
• 2:39
  Speaker 1: of the book, you say something that I found to
• 2:41
  Speaker 1: be surprising. You talked about the fact that you've recently
• 2:44
  Speaker 1: been diagnosed with some cognitive impairment, which you say could
• 2:48
  Speaker 1: lead to Alzheimer's, And um, why did you put that
• 2:51
  Speaker 1: in the book? You didn't need to put that in. No,
• 2:53
  Speaker 1: I didn't. Christie and I talked about it and she said, look, John,
• 2:57
  Speaker 1: you're always up front with people. Uh, you're in this book.
• 3:01
  Speaker 1: Tell people the truth, tell them you're having some issues.
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  Speaker 1: So we talked about it, and I agree it's the
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  Speaker 1: right thing to do. I mean, I didn't put it
• 3:08
  Speaker 1: in there for sympathy. I didn't put it in there
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  Speaker 1: for you know, come over and give me a hug.
• 3:14
  Speaker 1: I just think my personality has been upfront. I tell
• 3:18
  Speaker 1: people what's going on. I did that when I ran
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  Speaker 1: Morgan Stanley. I did it at Credit Sweez, even though
• 3:23
  Speaker 1: the Swiss didn't like me very much for doing it.
• 3:25
  Speaker 1: I did it at Credit Sweez. That's who I am.
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  Speaker 1: I'm up front. I tell people what's going on. Look,
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  Speaker 1: it happens. You say that maybe you thought it came
• 3:34
  Speaker 1: from your football Injries, or maybe you fell off in
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  Speaker 1: a t v um. But in hindsight, is it more
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  Speaker 1: of a genetic kind of thing? Do you think? Or
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  Speaker 1: the doctors don't really know? Well, the doctors don't know
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  Speaker 1: it's genetic. I mean, my mother did have Alzheimer's. I
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  Speaker 1: just think you need information. Look, I hope my contitive
• 3:55
  Speaker 1: skills last a long time. But life's life and just
• 3:58
  Speaker 1: live it. And I don't. I don't think trying to
• 4:03
  Speaker 1: hide things. You know, if you are, if you and
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  Speaker 1: I didn't know each other like we know each other
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  Speaker 1: we go out to dinner. I don't want you to say, John,
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  Speaker 1: you just told me that three minutes ago. I want
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  Speaker 1: to put a little warning out there, you know, give
• 4:17
  Speaker 1: me a break. I may repeat myself and and I
• 4:20
  Speaker 1: cover myself by saying I may have already told you this. Now.
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  Speaker 1: Christie is your wife of more than fifty years as
• 4:26
  Speaker 1: well years. Okay, so where did you meet her? I
• 4:32
  Speaker 1: met her through Charlie Rose. So Charlie Rose and I
• 4:35
  Speaker 1: were at Duke University. He was a couple of years
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  Speaker 1: ahead of me, and he had moved to New York
• 4:41
  Speaker 1: and I was in New York working at Smith Barney
• 4:43
  Speaker 1: at the time, and he called me up and said,
• 4:46
  Speaker 1: you know, my wife's sister is coming up. We'd like
• 4:48
  Speaker 1: you to, you know, take her out. I thought about
• 4:51
  Speaker 1: it a little bit and got a date for Friday
• 4:53
  Speaker 1: night and calling it back and said, okay, we'll go
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  Speaker 1: out Saturday night. And uh. I got up to their
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  Speaker 1: apartment on uh. Mary was a beautiful woman and Christie
• 5:03
  Speaker 1: walked in. She took my breath away. Not only beautiful,
• 5:07
  Speaker 1: but had a great smile. She was very warm, very friendly.
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  Speaker 1: If it wasn't love at first sight, it was pretty close.
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  Speaker 1: Let's talk about your background. So you grew up in
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  Speaker 1: North Carolina, but your grandfather immigrated from Lebanon, is right.
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  Speaker 1: But why did he go to the North Carolina? Was
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  Speaker 1: her big Lebanese community there or did he intend to
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  Speaker 1: go to another place? There was a big Lebanese community
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  Speaker 1: in the South Carolina, and uh, he was going to
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  Speaker 1: go to Marry in South Carolina when he got off
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  Speaker 1: Ellis Island and he ended up in Merryon, North Carolina.
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  Speaker 1: He stayed the night in the train depot. No one
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  Speaker 1: came to pick him up. So finally a conductors said
• 5:47
  Speaker 1: get on and pulled him on the train and took
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  Speaker 1: him to Charlotte, North Carolina on that that train. And
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  Speaker 1: there was a Arabic family around a coffee shop at
• 5:56
  Speaker 1: the train station, and they talked about the mix up.
• 6:00
  Speaker 1: They gave a job. He started washing dishes. Then he
• 6:02
  Speaker 1: became a peddler. Then he went back and got the
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  Speaker 1: rest of his family and they had made enough money
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  Speaker 1: to get a wagon and they went in the countryside
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  Speaker 1: selling cloth, uh you know, sewing materials, shoes, stuff like that.
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  Speaker 1: And then that evolved into John mckinson's. John mack was
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  Speaker 1: my grandfather's name, and it was a clothing department store.
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  Speaker 1: And my father, who was an entrepreneur, decided he wanted
• 6:29
  Speaker 1: to be totally on his own and he started a
• 6:31
  Speaker 1: wholesale grocery business. And so they wanted you to go
• 6:34
  Speaker 1: on that business at some point. I don't think my
• 6:36
  Speaker 1: father did. Uh. My mother was a very strong force.
• 6:40
  Speaker 1: She only wanted to be a doctor, and uh, I
• 6:43
  Speaker 1: really didn't want to be a doctor. My father was
• 6:46
  Speaker 1: laid back and my mother was really aggressive. It was
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  Speaker 1: a great combination. So you were a high school football star. Well,
• 6:53
  Speaker 1: I don't know about a star, but I was a
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  Speaker 1: good football You're all state, all right, I'll state you've
• 6:57
  Speaker 1: done your homework. Okay, so all state. So you get
• 7:00
  Speaker 1: a scholarship at Duke University to play football, and what
• 7:03
  Speaker 1: happened to your career at Duke? Well, I thought it
• 7:06
  Speaker 1: was a good football players I got to do if
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  Speaker 1: they have some great players. And uh then in my
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  Speaker 1: sophomore year, I was a red shirt for one year.
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  Speaker 1: Then I was on like the second team, but I
• 7:17
  Speaker 1: broke c six in my neck. I cracked it. And
• 7:21
  Speaker 1: what happened every time I would tackle someone my left
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  Speaker 1: arm inside I would go dead. So Frank Bassett, who's
• 7:28
  Speaker 1: one of the orthopedic surgeons who used to be at Duke,
• 7:31
  Speaker 1: called the a D and said, this young man's football
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  Speaker 1: career is over. He has a bona fide injury. He
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  Speaker 1: cannot play football any longer. So that ended my football career.
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  Speaker 1: But once you're on scholarship, I still had to work there.
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  Speaker 1: So I was a manager, you know, getting towels and
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  Speaker 1: setting up trips when I go play. Uh, you know,
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  Speaker 1: one of the teams in Florida, one of the teams
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  Speaker 1: in the Big Ten. So when you graduated, did you say,
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  Speaker 1: I want to go to Wall Street and be the
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  Speaker 1: CEO of Morgan Stanley. Now when I graduated, um, I
• 8:04
  Speaker 1: need one course to finish Duke University. My scholarship had expired.
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  Speaker 1: So I got a job in a local brokerage firm
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  Speaker 1: called First Securities in North Carolina. So that got me
• 8:16
  Speaker 1: involved in the securities business. And there was a lady
• 8:19
  Speaker 1: there named Fanny Mitchell, and maybe you remember she ran
• 8:23
  Speaker 1: the job placement office at Duke University. So when the
• 8:26
  Speaker 1: recruiters would come down, she would say, there's one guy
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  Speaker 1: you gotta meet is John Mack. And I would meet
• 8:32
  Speaker 1: these recruiters and got a number of job offers, and
• 8:36
  Speaker 1: then I decided I like the securities business. Smith Barney
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  Speaker 1: wanted to open an opposite at that time in Atlanta.
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  Speaker 1: They offered me a job and I took it. She
• 8:44
  Speaker 1: went to Smith Barney. What did you do there where
• 8:46
  Speaker 1: you're like a registered investments exactly? I mean we started
• 8:51
  Speaker 1: out in a training class and I got my brokerage license,
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  Speaker 1: and then I was approached by the head of the
• 8:56
  Speaker 1: municipal bond division, why don't you come into the bond business.
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  Speaker 1: And I really didn't want to go down to open
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  Speaker 1: an office in Atlanta. Are down in Florida, so I
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  Speaker 1: took that job. So I got in the bond business
• 9:07
  Speaker 1: and I was a trader on the bond desk of
• 9:09
  Speaker 1: the minicipals. And then at some point that led Smith
• 9:14
  Speaker 1: Barney of getting into the corporate bond market, and I
• 9:17
  Speaker 1: transitioned over to corporate bonds. And then from there they
• 9:21
  Speaker 1: told me they would put me on commission, which they
• 9:23
  Speaker 1: never did, and I got approached by a small boutique
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  Speaker 1: firm called Smithers, which was really known for their bond
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  Speaker 1: acumen and their bond business. So I went over and
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  Speaker 1: became a salesman doing corporate securities corporate bonds at Smithers
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  Speaker 1: and Company. I've often thought to be a good trader,
• 9:40
  Speaker 1: you have to be pretty quick in your head with
• 9:42
  Speaker 1: numbers to make sure you get the numbers right. Is
• 9:44
  Speaker 1: that true? Where you really know that that is true?
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  Speaker 1: But I think as a salesman much more so than
• 9:49
  Speaker 1: a than a trader, that business, it's a commodity business
• 9:54
  Speaker 1: about relationships. So if you can build a relationship with
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  Speaker 1: your clients where they trust you and they go to
• 10:00
  Speaker 1: you when they have business to do, that's how you
• 10:03
  Speaker 1: become successful. Okay, So how did Morgan Stanley hear of
• 10:06
  Speaker 1: you and say you should join what was then considered
• 10:09
  Speaker 1: a white shoe firm? And the question, probably I hadn't
• 10:11
  Speaker 1: hired a lot of Lebanese back traders before it, right,
• 10:16
  Speaker 1: But it's a good story. So I met with Dick Fisher,
• 10:19
  Speaker 1: who was running that initiative to build a secondary bond business,
• 10:25
  Speaker 1: and we went back and forth and I said, Dick,
• 10:27
  Speaker 1: I'm flattered that you would all your job, but I
• 10:30
  Speaker 1: don't believe a Lebanese heritage from North Carolina who went
• 10:36
  Speaker 1: to Duke University has a chance it been making it
• 10:39
  Speaker 1: Morgan Stanley, and he said, well, you're wrong, and if
• 10:42
  Speaker 1: you think you come over here and you're right, when
• 10:47
  Speaker 1: you quit, I will resign. I'm telling you you're wrong.
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  Speaker 1: This is a meritocracy and you should join us. He
• 10:54
  Speaker 1: convinced me. So in those days, Morgan Stanley was a
• 10:56
  Speaker 1: private partnership, not a public companty, and it was a
• 11:00
  Speaker 1: company that basically underwrote let's say a T and T bonds,
• 11:03
  Speaker 1: but it didn't actually go out and sell them, price them,
• 11:06
  Speaker 1: and other people would sell them. So Morgan Stanley said,
• 11:09
  Speaker 1: we're now going to change that, and you became a
• 11:12
  Speaker 1: trader for Morgan Stanley, became a salesman at Morgan Stanley.
• 11:15
  Speaker 1: That's what they need. So you did that for a
• 11:17
  Speaker 1: while and then at some point people give you more
• 11:19
  Speaker 1: authority and you get to be in management. Did you
• 11:21
  Speaker 1: want to be in management or did you like to
• 11:23
  Speaker 1: be a trader or salesman? I like success, so I
• 11:28
  Speaker 1: thought the right way to go is managing being a manager,
• 11:31
  Speaker 1: and that's what I wanted to do. And whether there's
• 11:34
  Speaker 1: a lot of disagreement, were any good or not very good?
• 11:37
  Speaker 1: I liked it and I thought I was pretty good
• 11:39
  Speaker 1: at it. So you rose up and you ultimately are
• 11:41
  Speaker 1: offered the position of being the CEO of Morgan Stanley. Well, yeah, eventually,
• 11:47
  Speaker 1: but there were there were a lot of blocks along
• 11:49
  Speaker 1: the way to do that. But then all of a
• 11:51
  Speaker 1: sudden you decided you needed to do a merger with
• 11:55
  Speaker 1: Dean Witter. And why did you need to do that? Well, uh,
• 12:00
  Speaker 1: Dean Witter was owned by Sears and they had decided
• 12:04
  Speaker 1: to spin it off, and we had Morgan Stanley got
• 12:08
  Speaker 1: the order from Sears to do this, this transaction to
• 12:13
  Speaker 1: raise money and an equity transaction. So when we met
• 12:17
  Speaker 1: with Phil Purcell and talked about all their salesmen, their
• 12:22
  Speaker 1: branch offices, it became apparent to me and also to
• 12:26
  Speaker 1: Dick Fisher, that this is the way to really build
• 12:29
  Speaker 1: a franchise because distribution is going to be more and
• 12:33
  Speaker 1: more important and to have a connection with retail clients
• 12:37
  Speaker 1: would be important. And that's how we made the decision.
• 12:40
  Speaker 1: There was pushedback in the firm, but with Parker Gilbert
• 12:43
  Speaker 1: and Dick Fisher's leadership, we were able to convince the
• 12:46
  Speaker 1: partners this is the right thing to do, and we
• 12:48
  Speaker 1: did it. Your firm was a leading Wall Street firm.
• 12:51
  Speaker 1: You could argue Dean Winter was a so called main
• 12:53
  Speaker 1: street firm and putting the true together, I've never been
• 12:56
  Speaker 1: done like that before. And how did you know negotiate
• 13:00
  Speaker 1: who was going to be the CEO? Well, at that time,
• 13:03
  Speaker 1: Dean Winter owned Discover Card, so their market cap was
• 13:07
  Speaker 1: dramatically larger than ours. So we based it on market
• 13:11
  Speaker 1: cap and they had a much larger market cap. To
• 13:14
  Speaker 1: do the deal, Purcell wanted to be in charge. That
• 13:18
  Speaker 1: was one of the prerequisites to do the deal, that
• 13:21
  Speaker 1: he'd be the CEO and I'd be the president of firm.
• 13:24
  Speaker 1: And we did that deal. All right. She did that deal,
• 13:26
  Speaker 1: and being president under somebody else was a step back.
• 13:29
  Speaker 1: You could argue, though it's a bigger firm. How long
• 13:32
  Speaker 1: did that last? Uh, hey, that's a good question. I
• 13:35
  Speaker 1: know it didn't last too long. Ultimately you said I've
• 13:39
  Speaker 1: had enough of this and you didn't like his style,
• 13:41
  Speaker 1: and you write about that in your book. But you
• 13:44
  Speaker 1: ultimately said, okay, I'm out of here and so unemployed,
• 13:48
  Speaker 1: and you tell your wife, guess what, your husband's unemployed
• 13:52
  Speaker 1: right now. My wife is so supportive. I could have
• 13:56
  Speaker 1: told her anything and she would. She's on my side.
• 13:58
  Speaker 1: It was great you know, I ended up at one
• 14:01
  Speaker 1: point kind of going to a hedge fund and work
• 14:04
  Speaker 1: with Art Sandberg, and I did that for a while,
• 14:07
  Speaker 1: but I was really flexible. And I think they call
• 14:11
  Speaker 1: them the grumpy old men who went after the existing
• 14:16
  Speaker 1: management at Morgan Stanley and felt like they were losing
• 14:19
  Speaker 1: their edge and also their reputation as a really great
• 14:23
  Speaker 1: investment bank and really led by Parker Gilbert and Louis
• 14:27
  Speaker 1: Bernard and some of the senior partners who had retired
• 14:30
  Speaker 1: and they owned a lot of stock, and they put
• 14:32
  Speaker 1: a lot of pressure on Dean word or Morgan Stanley
• 14:37
  Speaker 1: to make a change. And that's how I ended up
• 14:39
  Speaker 1: going back. So Phil Purcel was austed and then they
• 14:43
  Speaker 1: came to you and to your surprise, they said come
• 14:45
  Speaker 1: back and be the CEO. You hadn't known that you
• 14:47
  Speaker 1: were going to be asked, correct, I didn't know that
• 14:49
  Speaker 1: at all. So what was it like when you came
• 14:50
  Speaker 1: back to where there are people cheering for you when
• 14:52
  Speaker 1: you came back into Morgan Stanley. You've seen the film, yes,
• 14:56
  Speaker 1: so you've also gotten been coming very involved with an
• 15:00
  Speaker 1: nonprofit area. I served with you on the Duke Board,
• 15:02
  Speaker 1: as I mentioned earlier, Duke University board. But you also
• 15:05
  Speaker 1: became involved with New York Presbyterian Hospital and became the
• 15:08
  Speaker 1: chairman of the board. So what got you involved with
• 15:10
  Speaker 1: that area. The previous senior part in Morgan Stanley was
• 15:14
  Speaker 1: Bob Baldwin, who was on the hospital board. And he
• 15:18
  Speaker 1: would come and see me and say, John, I want
• 15:19
  Speaker 1: you to to go on the hospital board. And I said, Bob,
• 15:21
  Speaker 1: I've been on hospital boards before. All they want some money,
• 15:24
  Speaker 1: I just write you a check. No, I don't want that.
• 15:27
  Speaker 1: I want you to get involved. I want you on
• 15:28
  Speaker 1: the board. And I said, okay, Well, out of respect
• 15:31
  Speaker 1: for you, I'll go up and meet some of the people.
• 15:35
  Speaker 1: And Christie and I went up, had a tour of
• 15:37
  Speaker 1: the hospital and they took us to the neo natal
• 15:41
  Speaker 1: Care Babies uh Wing And when I walked in, I
• 15:46
  Speaker 1: was shocked. I mean, it really looked like Frankenstein's laboratory.
• 15:51
  Speaker 1: Everything was old. Yeah, these big yellow pipes and rubber
• 15:55
  Speaker 1: tubes coming down. Yeah, these little infants four pounds three
• 15:59
  Speaker 1: pounds and incovators. It kind of broke my heart and
• 16:04
  Speaker 1: broke Christie's heart. So so we go back and uh
• 16:08
  Speaker 1: I decided to take some of the leaders of the firm.
• 16:12
  Speaker 1: I want you to come up, I want you to
• 16:13
  Speaker 1: see the neo natal care. I want you to meet
• 16:15
  Speaker 1: some of the doctors and mirasces. So we bring them up,
• 16:18
  Speaker 1: they see it, and then out of that, uh, people
• 16:23
  Speaker 1: want to do something to change it. And I said, look,
• 16:26
  Speaker 1: there's no children's hospital in New York less bill a
• 16:29
  Speaker 1: Morgan Stanley Children's Hospital. And I think the firm put
• 16:32
  Speaker 1: in total over time a hundred million dollars. The employees
• 16:36
  Speaker 1: got involved in a big way, our clients got involved,
• 16:40
  Speaker 1: and I think from a sense of philanthropy, it's one
• 16:43
  Speaker 1: of the best things Morgan Stanley has ever done. So
• 16:45
  Speaker 1: how did you build Morgan Stanley where you focused on underwriting, trading,
• 16:51
  Speaker 1: other areas that were new to Wall Street. Well, I
• 16:54
  Speaker 1: focused on what we did really well, and what we
• 16:56
  Speaker 1: really did extremely well was bill relationships with corporations and CEOs.
• 17:03
  Speaker 1: We were either number one or number two in the
• 17:05
  Speaker 1: M and A tables every year, so that was very important.
• 17:09
  Speaker 1: And then we said, look, if we're going to be
• 17:11
  Speaker 1: doing M and A and we have these wonderful relationships
• 17:14
  Speaker 1: and trust, let's move into the secondary market and become
• 17:17
  Speaker 1: a very active securities business. So we ended up building
• 17:22
  Speaker 1: a very large platform at the institutional level, and over time, UH,
• 17:29
  Speaker 1: with Dean Winter, you had the retail, so we really
• 17:32
  Speaker 1: focused on being an institutional firm with a very strong
• 17:36
  Speaker 1: retail base. Your predecessor, Philip Percell, was famous for not
• 17:39
  Speaker 1: meeting with a lot of people. He was a little isolated.
• 17:41
  Speaker 1: Some people accused him of being You like to be
• 17:44
  Speaker 1: in the trading floor, near the trading floor, being with
• 17:46
  Speaker 1: the customers all the time, or with your employees. Is
• 17:48
  Speaker 1: that right? Yes? And so if you found people that
• 17:52
  Speaker 1: were ignoring their clients or ignoring their employees people working
• 17:55
  Speaker 1: for you, you tended to tell them what you thought
• 17:58
  Speaker 1: without question. What I did when I was running the
• 18:01
  Speaker 1: division fixed income division, I would sit out on the
• 18:05
  Speaker 1: trading floor and have I had a glass booth office
• 18:10
  Speaker 1: so I could if I had need to have a
• 18:12
  Speaker 1: conversation with someone, instead of going off in the conference room,
• 18:16
  Speaker 1: we could sit in this glass office and we'd have
• 18:18
  Speaker 1: a conversation. And Uh, I would be on the phones.
• 18:21
  Speaker 1: I'd walk around and sit down by the best salesman
• 18:24
  Speaker 1: or the worst salesman. What are you working on? What
• 18:27
  Speaker 1: are your clients doing? I was always involved and I
• 18:30
  Speaker 1: had some really fun times in doing it. Um. I
• 18:34
  Speaker 1: think in my book I talked about how you treat people.
• 18:38
  Speaker 1: And I get off the elevator at eight o'clock in
• 18:41
  Speaker 1: the morning, and you look over to the right and
• 18:44
  Speaker 1: their delivery guys bringing coffee and egg sandwiches, and where
• 18:48
  Speaker 1: of you do for breakfast? And about twenty minutes later
• 18:51
  Speaker 1: I walked back and I go out on the trading
• 18:53
  Speaker 1: floor and I go up to the sky and I said,
• 18:56
  Speaker 1: how long you been here? He said about the every
• 19:00
  Speaker 1: minutes his hispanic, about thirty minutes. I said, if you
• 19:03
  Speaker 1: call the person to order breakfast, He said, yes, I've
• 19:06
  Speaker 1: called it three times. I said, give me the number.
• 19:09
  Speaker 1: So I gave it the number, and I said, this
• 19:11
  Speaker 1: is John mac I want you to get your ass
• 19:12
  Speaker 1: out here. And he comes out in front of the
• 19:15
  Speaker 1: Philly and I said, look, we're no better than he is.
• 19:19
  Speaker 1: He's just trying to make a living. When you make
• 19:21
  Speaker 1: him wait, you take money out of his pocket. If
• 19:24
  Speaker 1: I ever hear about it again, you're fired. That went
• 19:27
  Speaker 1: around the floor like that. You don't treat people that way.
• 19:31
  Speaker 1: And I hope that's ingrained in me before I went
• 19:34
  Speaker 1: to Morgan Stanley. But I really learned it from Dick Fisher.
• 19:38
  Speaker 1: He was such a gentleman and very smart and made decisions.
• 19:41
  Speaker 1: So the person that you almost fired, did he do
• 19:45
  Speaker 1: that again or he didn't do it again. No one
• 19:48
  Speaker 1: did it again. So Morgan Stanley was doing quite well,
• 19:50
  Speaker 1: and Morgan Stanley is competing principally with Goldman Sacks. I
• 19:54
  Speaker 1: guess was your main rival. And then all of a sudden, um,
• 19:57
  Speaker 1: we go into a recession two thousand seven, two thousand eight.
• 20:00
  Speaker 1: So what happened was I remember from reading from that
• 20:03
  Speaker 1: period of time and from reading your book, you had
• 20:05
  Speaker 1: this large cash reserve and you wanted to make sure
• 20:07
  Speaker 1: you had a lot of cash. While people were afraid
• 20:09
  Speaker 1: of Morgan Stanley may be going under, so they said,
• 20:11
  Speaker 1: give me my cash back. I'm gonna put it in JP. Morgan,
• 20:13
  Speaker 1: it's exactly right. And so all of a sudden the
• 20:16
  Speaker 1: cash is going all the way down. Right, at some
• 20:18
  Speaker 1: point you say, maybe we're not going to make it. Yes,
• 20:21
  Speaker 1: exactly right. Well, thank God for the Japanese is what
• 20:25
  Speaker 1: I can say. What I learned is it goes back
• 20:29
  Speaker 1: to when Morgan Stanley would bring uh brokers from whether
• 20:34
  Speaker 1: the Mirror or Simu Toomo. It didn't make any difference,
• 20:37
  Speaker 1: and they would in a training program at Morgan Stanley,
• 20:40
  Speaker 1: and the Japanese who came through that training program respected
• 20:45
  Speaker 1: the culture of Morgan Stanley. So when we were on
• 20:48
  Speaker 1: the brink uh they stepped up and gave us the
• 20:51
  Speaker 1: money to stay in business. So it turned out to
• 20:53
  Speaker 1: be a good investment for Mitsubishi because your stock is
• 20:55
  Speaker 1: flourished since then. And after that happened, did you think
• 20:59
  Speaker 1: that Wall Street learned any lessons? And you think this
• 21:01
  Speaker 1: could happen again where you have enormous illiquidity problems or
• 21:05
  Speaker 1: liquidity problems, and Wall Street really has changed very much. Well,
• 21:09
  Speaker 1: I think the business of All Street hasn't changed that much,
• 21:12
  Speaker 1: but the scrutiny on capitol and capital solvency is very
• 21:17
  Speaker 1: very focused, and I think the FED does a much
• 21:21
  Speaker 1: better job in paying attention to the liquidity of these
• 21:24
  Speaker 1: investment banks. Also, I think boards of directors have elevated
• 21:30
  Speaker 1: risk management to a level that never existed when I
• 21:33
  Speaker 1: was there. So going through a near death experience that
• 21:37
  Speaker 1: we went through, and other firms in some cases they
• 21:40
  Speaker 1: actually died like unfortunately Lehman Brothers, h boards focus on
• 21:47
  Speaker 1: risk management it's not about what deal you did. It's
• 21:51
  Speaker 1: not about you know, we're going to open another branch office.
• 21:54
  Speaker 1: It's about liquidity and solvency. So after this happened and
• 22:00
  Speaker 1: Morgan Stanley comes back and it's doing quite well, you
• 22:02
  Speaker 1: open me decide to retire, and you handed the reins
• 22:06
  Speaker 1: over to James Gorman, who had not been a lifer
• 22:09
  Speaker 1: at Morgan Stanley, and in fact he had come from
• 22:10
  Speaker 1: Merrill Lynch, who you would recruited him from there. And
• 22:13
  Speaker 1: he was a consultant, not a trader, not an investment
• 22:16
  Speaker 1: banking person. So was that controversial to give it to
• 22:19
  Speaker 1: him if it were confident. I've never heard about anyone
• 22:22
  Speaker 1: saying had could you do that? James is smart. He
• 22:25
  Speaker 1: knows the business. He spent time as a consultant, time
• 22:28
  Speaker 1: at Merrill Lynch. I saw how he ran the business,
• 22:31
  Speaker 1: our retail business. At Morgan Stanley, he was on the
• 22:34
  Speaker 1: management committee. I got a chance to see his interface.
• 22:37
  Speaker 1: I would go up once a week and spend time
• 22:40
  Speaker 1: in the office up in Westchester to be with him
• 22:42
  Speaker 1: and how he managed. As smart as he can be,
• 22:45
  Speaker 1: can make a decision, doesn't suffer fools, and he has
• 22:48
  Speaker 1: a great personality he was a natural. So for a
• 22:51
  Speaker 1: young person who now was looking at a career, would
• 22:53
  Speaker 1: you recommend a Wall Street career today? David, Yeah, I listened.
• 22:57
  Speaker 1: There are not many jobs you can have as a
• 22:59
  Speaker 1: young individual where you're always always learning, and maybe not
• 23:04
  Speaker 1: something you can write. But Wall Street lives on the
• 23:07
  Speaker 1: news and what people are doing and what are the trends.
• 23:10
  Speaker 1: I don't know many businesses like that. If you go
• 23:12
  Speaker 1: in the man of actioning business, you have a sales cycle,
• 23:15
  Speaker 1: you hope it's doing well. But in Wall Street you
• 23:18
  Speaker 1: have data every day that tells you not only what's
• 23:21
  Speaker 1: going on in this country, what's going on in the world.
• 23:25
  Speaker 1: So Ahoul, you look at your career, what do you
• 23:26
  Speaker 1: think you're the most proud of having done help with
• 23:29
  Speaker 1: New York Presbyterian, help Morgan Stanley recover from some of
• 23:33
  Speaker 1: its problems. What are you most proud of? I'm most
• 23:35
  Speaker 1: proud of where Borgans Stanley came from just a few
• 23:38
  Speaker 1: hundred people to where it is now. Um, I think
• 23:42
  Speaker 1: taking the risk we took doing the Dean win Or trade,
• 23:46
  Speaker 1: having the bumps that we had to live with. Uh,
• 23:48
  Speaker 1: it turned out to be an unbelievable investment bank with
• 23:51
  Speaker 1: a great culture and to have James Gorman running and
• 23:55
  Speaker 1: now I couldn't be happier or more proud of it. So,
• 23:57
  Speaker 1: in hindsight, if you had to do it all over again,
• 23:59
  Speaker 1: would you have into medical school as your mother wanted?
• 24:01
  Speaker 1: Or you're happy you became a Wall Street person to
• 24:05
  Speaker 1: my mother's disappointment. Thank god I came to Pall Street.
• 24:10
  Speaker 1: Thanks for listening to hear more of my interviews. You
• 24:12
  Speaker 1: can subscribe and download my podcast on Spotify, Apple, or
• 24:16
  Speaker 1: wherever you listen.