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 (NYSE:MS) 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 (NYSE:GS). 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 (NASDAQ:MSFT) 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.