FIRST ON CNBC: CNBC TRANSCRIPT: CNBC'S BILL GRIFFETH SITS DOWN WITH JOHN MACK, MORGAN STANLEY CHAIRMAN & CEO, TODAY, THURSDAY, OCTOBER 15TH ON CNBC'S "POWER LUNCH"
Following is the unofficial transcript of a FIRST ON CNBC interview with Morgan Stanley Chairman & CEO John Mack today, Thursday, October 15th on CNBC's "Power Lunch" at 12:15PM ET.
All references must be sourced to CNBC.
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KNEALE: LET'S HEAD BACK TO BILL GRIFFETH IN NORTH CAROLINA. HE'S JOINED BY JOHN MACK IN A FIRST ON CNBC INTERVIEW.
GRIFFETH: THANK YOU VERY MUCH. IT'S A CITY NEAR AND DEAR TO MY HEART. I'VE BEEN HERE MANY, MANY TIMES OVER THE YEARS. I HAVE NEVER BEEN THIS COLD. JOHN MACK WHO WENT TO SCHOOL HERE YOU'RE A NORTH CAROLINAN. YOU WENT TO DUKE. YOU CEOs REALLY KNOW HOW TO PICK THE SPOTS TO HAVE YOUR SUMMITS. GOOD JOB. THE DOW AT 10,000, YOUR CEO SURVEY HERE THEY JUST RELEASED, JAMIE DIMON SAYING THAT 62% OF YOU FEEL IMPROVING BUSINESS CONDITIONS RIGHT NOW. IS THE ECONOMY REALLY DOING THAT WELL?
MACK: IT'S GETTING BETTER. THAT'S WELL, YOU HAVE TO DEFINE THAT. I WAS WITH ALAN MULLALY FROM FORD THE OTHER DAY. IT'S REALLY SPARSE. HE DOES SEE SOME PICK-UP, NOT A LOT. JEFF IMMELT AT GE AND I CHATTED AGAIN, THERE ARE SOME GREEN CHUTES OUT THERE, BUT NOT ROBUST. SO CLEARLY, IT'S IMPROVING. I THINK ONE OF THE REASONS PEOPLE ARE FEELING GOOD IS THAT THE CAPITAL MARKET'S OPEN AGAIN. A YEAR AGO AT THIS TIME, IT WAS DIFFICULT TO RAISE MONEY, RAISE EQUITY MONEY OR BOND MONEY, SO PEOPLE FEEL BETTER. THEY KNOW THE WORLD'S NOT GOING TO COLLAPSE, BUT THE REAL GROWTH IS OVERSEAS IN THE EMERGING MARKETS AND HERE IN THE US WE'RE MAKING PROGRESS.
GRIFFETH: WHEN PEOPLE WAKE UP TO THE HEADLINES TODAY WITH THE DOW AT 10,000, THE QUESTIONS EMERGE ABOUT COMPENSATION. ABOUT THE INEQUITIES OCCURRING. UNPOPULAR MEDIA TELEVISION ALREADY ASKING PEOPLE ABOUT THE BONUSES ON WALL STREET.YOU KNOW THOSE QUESTIONS. THE INEQUALITY. IS CAPITALISM BROKEN. WHAT DO YOU SAY TO PEOPLE WITH THE STOCK MARKET DOING AS WELL AS IT'S DOING HERE AND PEOPLE STILL SUFFERING, HAVING TO TAKE PAY CUTS JUST TO KEEP THEIR JOBS.
MACK: LOOK, IT'S A VERY HOT ISSUE AND NO ONE ANSWER THAT WILL SATISFY EVERYONE, BUT NUMBER ONE, UNTIL JOBS START GETTING CREATED, PEOPLE STOP LOSING THEIR HOUSES IN FORECLOSURE AND THEIR SAVINGS GOES UP, I THINK IT'S GOING TO BE A TOPIC FOR A LONG TIME. WALL STREET CLEARLY HAS NOT DONE EVERYTHING RIGHT, BUT WE ARE REPRESENTING OUR SHAREHOLDERS, MAKING MONEY FOR THEM. TO BE HONEST WITH YOU IT'S AN EASY TARGET. NOT TO BE DEFENSIVE BECAUSE OVERTHE LAST TWO YEARS, I'VE TAKEN A NO BONUS AND WHAT I HAVE BEEN PAID I HAVE TAKEN IN ALL EQUITY I'VE NEVER TAKEN CASH. BUT ENOUGH'S ENOUGH. WE ARE HIRING PEOPLE. WE ARE DOING OUR PART. AT LEAST FOR GOLDMAN SACHS AND OURSELF AND JPMORGAN AND A FEW OTHERS, PAID THE T.A.R.P. MONEY BACK.
AND IN OUR CASE WE BOUGHT OUR WARRANTS BACK, WHICH IS A 20% RETURN FOR THE TAXPAYERS. BUT NO ONE WANTS TO TALK ABOUT THAT ISSUE COMP IS A BIG ISSUE AND WE'RE TRYING TO DO THE RIGHT THING. AT MORGAN STANLEY, WE DO HAVE A CLAWBACK AND MOST OF THE PEOPLE AT LEAST AT THE MOST SENIOR LEVELS, OVER 50% OF THEIR COMPENSATION BILL IS IN EQUITY.
GRIFFETH: YOU UNDERSTAND THE PEOPLE WHO ESPECIALLY IN THE MIDWEST WHOSE JOBS ARE STILL BEING LOST AND FACTORIES ARE BEING SHUT DOWN, THEY JUST FEEL THIS INEQUALITY.
MACK: ABSOLUTELY. LISTEN I'M FROM NORTH CAROLINA. MY SALARY'S $800,000.THAT'S A LOT OF MONEY ANYWHERE. IT'S A LOT OF MONEY HERE. I DO UNDERSTAND THAT. BUT AT THE SAME TIME, IT HAS TO BE BROADER THAN LET'S JUST FOCUS ON COMPENSATION. WHY NOT JOB CREATION.
GRIFFETH: LET'S GO BACK A YEAR. I KNOW YOU JUST GOTTEN ANDREW ROSS SORKIN'S BOOK TOO BIG TO FAIL THAT RECOUNTS THOSE DAYS IN SEPTEMBER OF LAST YEAR WHEN LEHMAN HAD JUST GONE UNDER. THERE'S AN EXCERPT IN "VANITY FAIR" COMING OUT AS WELL THAT I JUST READ ON THE PLANE COMING DOWN HERE. VERY RIVETING STUFF ABOUT YOU AND LLOYD BLEINKFEIN DEALING WITH THE TREASURY AND FED AS MONEY IS LEAVING YOUR FIRMS AT A RAPID RATE AT THAT TIME AND YOUR STOCK PRICES COLLAPSING. WE REMEMBER THOSE DAYS.
ARE YOU ABLE TO READ THAT THIS PASSIONATELY A YEAR LATER OR DO YOU RELIVE THE EMOTIONS YOU WERE FEELING AT THAT TIME?
MACK: IT'S JUST AMAZING. I RELIVE THE EMOTIONS. I GET BACK THERE IN A HEART BEAT. WHEN I FIRST STARTED READING THE ARTICLE, I HAD TO KIND OF GRIP MYSELF BECAUSE I'M BACK, JUST BANG, LIKE WHERE WE WERE. I WAS IN RUSSIA NOT LONG AGO. I WAS MEETING WITH SPAREBANK AFTER THE MEETING, HIS CHIEF OF STAFF SAID TO MINE, JOHN IS STILL REALLY PASSIONATE, SO WHEN SHE TOLD ME THAT, I SAID, LET ME TELL YOU THE WHOLE STORY. AND WHEN I TOOK HIM THROUGH IT HE GOT UP FROM THE TABLE AND STARTED HUGGING ME BECAUSE THERE WAS SO MUCH EMOTION. AND THE VIEW, THAT I DID, AND MORGAN STANLEY, STOOD UP TO DO WHAT'S RIGHT FOUR OUR SHAREHOLDER AND OUR EMPLOYEES AND I THINK THAT'S WHAT WE RESPECTED.
GRIFFETH: THERE IS A SCENE, A COUPLE OFTHEM STAND OUT TO ME. ONE IS TIM GEITHNER WHO WAS THEN THE NY FED, WHO WAS SITTING WITH A CARD WITH A LIST OF NAMES OF POTENTIAL MERGER PARTNERS FOR MORGAN STANLEY. DOWN THE LIST MORGRAN STANLEY AND GOLDMAN SACHS MORGAN STANLEY AND CITIGROUP MORGRAN STANLEY AND WAXHOVIA AND ON AND ON AND ON A REMARKABLE MOMENT IN OUR COUNTRIES HISTORY WHEN OUR GOVERNMENT IS GETTING INVOLVED IN ACTIVITY ON WALL STREET LIKE THAT.
MACK: YOU ARE RIGHT AND ALL I CAN SAY IS WE PLAYED EVERY ONE ON THAT DANCE CARD.
GRIFFETH: YOU ARE ON THE PHONE WITH ALL OF THOSE GENTLEMEN.
MACK: LISTEN WHEN TIM AND HANK ARE SAYING,YOU NEED TO THINK ABOUT THESE THINGS, YOU'D BE REMISSED NOT TO HAVE THOSE CONVERSATIONS AND WE TALKED TO EVERYONE. BUT AT THE END OF THE DAY, IT WAS MUFG WHO REALLY STEPPED UP AND MADE THE INVESTMENT IN US. AND THEN THE FED ASKING MORGAN STANLEY AND GOLDMAN SACHS TO BE BANK HOLDING COMPANIES REALLY SAID, YOU ARE TOO BIG TO FAIL. YOU ARE IMPORTANT TO THE SYSTEM. AGAIN, IT'S A YEAR AGO, BUT THE REPRECUSSIONS AND THE WORK WE'RE DOING TO MAKE SURE WE LIVE UP TO OUR RESPONSIBLETIES, WE'VE REDUCED LEVERAGE, WE'VE RAISED MORE CAPITAL WE'VE INCREASED OUR RISK MANAGEMENT FUNCTION. WE HAVE A MUCH STRONGER MORE LIQUID BALANCE SHEET. I THINK EVERYONE'S DONE THAT
GRIFFETH: THE FINANCIAL REGULATION THAT'S MAKING ITS WAY THROUGH CONGRESS RIGHT NOW, THEY'RE STILL TALKING ABOUT THE CONSUMERPROTECTION AGENCY.THEY'RE STILL TALKING ABOUT DOING SOMETHING ABOUT BONUSES AND CEO PAY. ALL THOSE THINGS IN THERE. AFTER WHAT WE'VE GONE THROUGH IN THE LAST YEAR, REGULATION WANTS TO FIX THE MOST RECENT PROBLEM AND MESS. WHAT SHOULD THAT REGULATION LOOK LIKE?
MACK: NUMBER ONE? I THINK WE HAVE TOO MANY DIFFERENT REGULATORS. THERE NEEDS TO BE A PULLING TOGETHER OR CONSOLIDATION
GRIFFETH: YOU WANT ONE SINGLE REGULATOR.
MACK: NOT ONE SINGLE REGULATOR. I DO WANT A SYSTEMIC RISK MANAGER ON A GLOBAL BASIS. WE NEED THAT. BUT WE CLEARLY NEED THE S.E.C., THE FED AND THE FTC AND OTHERS, BUT THERE NEEDS TO BE A WAY TO CONSOLIDATE SOME OF THESE AND PUT MORE RESOURCES INTO A STRONGER REGULATORY ARM. WHETHER IT'S YOU KNOW, THE FED OR THE S.E.C. OR WHOMEVER IT MAY BE, I THINK THAT CONVERSATION GETS WRAPPED UP IN POLITICS AND GETS OFF TRACK. WE DO NEED TO MAKE SOME CHANGES THOUGH.
GRIFFETH: WHAT WILL WE LOOK LIKE IN A YEAR FROM NOW? LAST YEAR AT THIS TIME, I GUARANTEE YOU, NOBODY THOUGHT WEWOULD BE AT 10,000 ON THE DOW. DO THINGS GET BETTER FROM HERE OR DO WE START TO SLOW DOWN? JOSEPH TOLD US YESTERDAY FROM COLUMVBIA UNIVERSITY, HE SEES ANOTHER SLOWDOWN AFTER THE COFFERS HAVE BEEN REPLENISHED AND THE FED STARTS TO TAKE AWAY SOME OF THE STIMULUS.
MACK: AGAIN, I THINK THERE ARE A COUPLE OF THINGS I'M OPTIMISTIC ABOUT. IF YOU GO BACK TO MARCH, END OF FEBRUARY, THE LOW POINT ON THE DOW, S&P, I THINK THAT WAS JUST AN OVERREACTION. THAT WAS PANIC. PEOPLE WERE BLOWING SECURITIES OUT THERE'S BEEN SOME TALK WE'RE GOING TO GO BACK TO THAT LEVEL.I DON'T BELIEVE IT. WILL THERE BE A SELL-OFF? SURE. I THINK WHEN WE GET THERE THIS A YEAR FROM NOW, WE'RE GOING TO BE A STRONGER ECONOMY. CLEARLY DEFICITS WILL CAUSE A LOT OF PROBLEMS. WE NEED TO FOCUS ON THAT. AND I THINK, HOPEFULLY, AS THIS ADMINISTRATION GETS THROUGH SOME OF THEIR AGENDA ITEM IN HEALTH CARE FOR EXAMPLE, WE SPEND A LOT MORE TIME ON JOB CREATION. THAT'S WHAT WE NEED TO DO WE NEED TO CREATE JOBS
GRIFFETH: THERE ARE THOSE WHO SAY THAT WITH THE GOVERNMENT HAVING TO STEP IN AS MUCH AS IT HAS HAD TO DO IN THE LAST YEAR AND THEY SAY MAYBE CAPITALISM IN BROKEN? WHAT DO YOU SAY?
MACK: I DON'T BELIEVE IT. I THINK IF YOU COULD PROVE THAT AND MAYBE I WOULD JUST RETIRE. I DON'T BELIEVE THAT IT'S BROKEN.
I DON'T BELIEVE IT'S DEAD. I BELIEVE IT'S VERY STRONG. I BELIEVE THAT WE CONTINUE TO FOCUS ON THE NEGATIVE OF CAPITALISM.
YOU GO BACK TEN YEARS AGO. YOU THINK ABOUT THE SILICON VALLEY AND HOW AMERICA WAS A LEADER IN THE WHOLE TECH BOOM.
AND THE TECHNOLOGY INNOVATIONS THAT WE REALLY LET THE WORLD ON THAT HAD TO DO WITH CAPITALISM, THAT HAD TO DO WITH PUTTING MONEY AT RISK TO BUILD THESE BUSINESSES THAT'S HAD A HUGE PAYOFF A PAYOFF NOT JUST FOR SHAREHOLDERS BUT PAYOFF IN CREATING JOBS IN CREATING A LEADING BUSINESS AROUND THE WORLD THAT AMERICA'S KNOWN FOR
GRIFFETH: BEFORE I LET YOU GO ONCE PEOPLE GET TO SEE THE VANITY FAIR EXCERPT AND ONCE THEY START TO READ ANDREW ROSS SORKIN'S BOOK YOU KNOW WHERE I AM GOING HERE THERE IS A SCENE IN THERE YOU ARE IN A MIDST OF NEGOTIATING A $9 BILLION DOLLAR CAPITAL INFUSION FROM MITSUBISHI YOU ARE ON THE PHONE THROUGH AN INTERPRETOR TRYING TO GET THIS THING DONE YOU ARE REPEATEDLY TOLD BY YOUR ASSISTANT AT ONE POINT THAT TIM GEITHNER WHO WAS THE NY FED AT THE TIME IS ON THE PHONE AND WANTS TO TALK TO YOU IMMEDIATELY AND HANK PAULSON WHO WAS THE TREASURY SECRETARY WANTS TO TALK TO YOU IMMEDIATELY YOU KEEP FENDING THIS OFF AND FINALLY IN A MOMENT OF DESPERATION YOU ARE QUOTED THAT I CAN'T EVEN SAY THIS ON TV HERE AS INSTRUCTING THE NY FED PRESIDENT WHAT HE COULD DO WAS THAT AN ASSURATE QUOTE
MACK: IT WAS LOOK WE WERE IN A BATTLE AND I HAD TO GET THAT MONEY I WAS NOT GETTING OFF THE PHONE TO TALK TO ANYONE
GRIFFETH: AND YOU GOT THE $9 BILLION
MACK: WE DID MITSUBISHI HAS BEEN JUST A WONDERFUL PARTNER
GRIFFETH: HAVE YOU HEARD FROM MR GEITHNER
MACK: NO BUT I'LL SEE HIM AND I AM SURE HE WILL BRING IT UP AGAIN I HAVE A GREAT STAFF HOPEFULLY SHE DIDN'T RELAY THAT MESSAGE TO HIM
GRIFFETH: IT JUST SPEAKS TO THE EMOTIONS AT THE TIME DOESN'T IT
MACK: EXACTLY IT WAS INTENSE
GRIFFETH: GLAD ITS OVER
MACK: FOR SURE
GRIFFETH: THANKS FOR SPENDING SOME TIME WITH US
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