John Mack on Economic Crisis, Exec Compensation and Financial Reform

Morgan Stanley (MS) Chairman John Mack gave an exclusive interview to FOX Business Network’s [FBN] Charlie Gasparino and Brian Sullivan today. He spoke about the economic crisis, executive compensation and financial reform, saying “This will be more difficult to get a bill out of the Dodd committee, and there will be a lot of fighting back and forth.”

Here are some excerpts from the interview ; Courtesy of FOX Business Network

On the healthcare debate making finance reform more difficult: “This will be more difficult to get a bill out of the Dodd committee, and there will be a lot of fighting back and forth.”

On healthcare reform:

“My only concern is the way this was done. You would have hoped we could have taken more time and done it in a traditional way. Be that as it may, we’re here, he’s going to sign it and then the real work starts. There’s a lot of work to be done.” “The real issue is more on the deficit side. We’ve gotten some very positive numbers out of the budget office. We need to see exactly is that correct. Wall Street is very much in my view behind this – healthcare – but their concern is the budget.”

On executive compensation: “Over time you will see compensation come down on the Street.”

On Lloyd Blankfein’s compensation:

“Look at the performance of the stock and how shareholders should feel and what they’ve delivered. If you base it on that I think clearly he was fairly compensated and he deserved to be paid.”

On the U.S. being at risk of losing its AAA credit rating:

“I don’t think so. You got to go for safety and soundness. Anytime there is a crisis, you see the dollar go up in value. I think that in its self is huge.”

On whether Goldman Sachs deserves to be blamed for Wall Street’s woes:

“I don’t think they are the right firm; it’s an industry issue. We all have done some things or said some things we wish we hadn’t said and I think that kind of catapulted them.”

On the fact that AIG was not investigated earlier:

“There was no crisis, there was no problem. If they had done more due diligence maybe someone would have done that.”

On whether the era of Wall Street producing huge returns on investment is over:

“One of the things we have said is that we do need a lead regulator. I do think that is a positive step. We’ve said continuously we need a systemic risk manager. There are a number of pieces of this legislation I think we need and from my perspective I am very supportive of it.”

“There’s no question – if you put more capital into these businesses, you are going to reduce a lot of these businesses’ return on equity. Investors will feel more comfortable investing in these stocks that risk is going to be focused on and controlled. It’s not a question of selling it, I believe that’s factual.”

On whether he believes there will be higher capital standards in reform movement:

“Without question. It will (impact earnings).”

“It’s a global business. I think the ability to earn is still extremely good.”

On whether there is a corporate debt bubble:

“If you look at the liquidity in the market today, it’s larger than anything I’ve ever seen.”

“I don’t think there is a real bubble.”

On whether proprietary trading was a major reason for the financial crisis:

“I don’t believe it. It just didn’t.”

On whether he agrees with the Volcker rule:

“I don’t agree. I think risk management should be handled by requiring specific amounts of capital vis a vis each business you’re in.”

On the crisis and future financial reform:

“Everyone had a piece to play in this. I don’t think you can point the finger at one regulator, the state or federal.”

“I think we need a fundamental change in our regulatory framework on financial service.”

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