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Net Net: Promoting innovation and managing change

Morgan Stanley CEO James Gorman: Banks 'dramatically safer'

Chairman and CEO of Morgan Stanley James P. Gorman participates in a panel discussion at the New York Times 2015 DealBook Conference at the Whitney Museum of American Art on November 3, 2015 in New York City.
Neilson Barnard | Getty Images | The New York Times

With more than seven years gone from the seminal event of the financial crisis, Morgan Stanley CEO James Gorman said Wall Street has turned a corner.

Regulators have spent the years since Lehman Brothers blew up on Sept. 15, 2008, focusing on making sure a too-big-to-fail-style crisis does not happen again. Dodd-Frank regulations and other measures have forced banks to rein in risk.

Banks as a whole have paid more than $204 billion in fines and settlements related to bad behavior around the crisis and since.

With much of those penalties in the past, declining leveraged ratios and a stronger economy have solidified the system, Gorman said Tuesday at the DealBook conference in New York.

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"The U.S. banking system is dramatically safer," said Gorman, who this week was named to the New York Federal Reserve board. "Let's be honest: It wasn't just the banks who messed up. There were a lot of people who tried to buy assets they couldn't afford. That's a reality."

Gorman's comments came two weeks after Morgan Stanley whiffed badly on earnings, with a decline of some 42 percent rattling investors.

Financial sector earnings more broadly have gained about 3.4 percent in the third quarter.

That's a far cry better from the dark days of the crisis. Gorman said Wall Street no longer is leveraged as badly as it was then, dropping from as much as 40 to 1 times down to 10 to 12 times.

"The risk profile of the banks is such that you'd have to be wrong 30 to 50 percent of the time," he said. "That's a completely different proposition."