'Room for Optimism' on Economy: Morgan Stanley CEO
Special to CNBC.com
Morgan Stanley CEO James Gorman told CNBC Wednesday he is more optimistic about the U.S. economy and Europe this year.
"The year has started a little firmer," he said during the Davos World Economic Forum. "The U.S. is in a little better shape than the markets have appreciated, and the markets are catching up."
He added, "We’re getting to better resolution in Europe [although] it’s still taking time. So the overall tone is certainly not worse than last year and I think there’s room for optimism."
Morgan Stanley has "cleared a whole raft of legacy issues" that came out of the 2008 financial crisis, most recently settling with MBIA to get some risky financial instruments off its books.
"So for the first time in three or four years the company is really competing on its merits," Gorman said.
The settlement also freed up a lot of capital that puts Morgan in a "much, much stronger position than 12 months ago" to meet Basel 3 capital requirements that go into effect Jan. 1.
He said international standards are good "if everybody ends up with the same capital liquidity standards." The problem is on the local country level.
"Some countries are employing a punitive tax, some countries are employing different standards of clawbacks on bonuses, some countries have their own specific legislation such as Dodd-Frank," Gorman said. Each country has to make sure those laws don't hurt global capital markets or their own financial centers.
"As much as the banking system may not be terribly popular it is an essential part of the economy," Gorman said of the U.S. "You do not want that moved offshore by regulation and legislation which is too aggressive."
Gorman said Morgan's priority now is to finish integrating Smith Barney into its brokerage operations rather than use capital for stock buybacks or increasing its dividend.