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Morgan Stanley’s Gorman on COVID-19 Crisis: ‘You Can’t Model This’

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After a tough few weeks, Morgan Stanley CEO James Gorman says he’s fully recovered from the coronavirus.

“I was one of the lucky ones — I was not hospitalized, and my lungs were not affected …,” he said during a televised interview with Bloomberg on Thursday. “My heart goes out to those who are not that fortunate. It’s a curse.”

More broadly, “The shock to the global economic system is something we have not seen since the Great Depression, and … [meanwhile] we have this massive healthcare crisis making its way around the world,” Gorman said. “You cannot model this.”

For businesses to survive, “What you’ve got to do is preserve your capital, ensure you’re well positioned to deal with the risk, understand the risk you are taking on as a business and manage your way through that,” he explained.

As part of its remote work arrangements, the bank’s executives speak daily and “are organized around … doing the job for clients and ensuring that Morgan Stanley remains stable during a period of  dramatic dislocation,” Gorman said.  

Today Is Different

When asked if the COVID-19 crisis is worse than the financial crisis of 2008 in terms of its economic fallout, “I’m not sure I would agree with that,” he said. 

While the current drop in GDP “is obviously so much worse … ,”  Gorman said, “there are just so many unknowns now” vs. the fundamental risks to the financial system of 2007-2008. “Without that rescue [of the financial system about decade ago], who knows what damage, over multiple decades, there would have been for the global economy.” 

What’s required to reverse today’s economic downturn? “The health care crisis has to get resolved,” he said. “We’re seeing that in certain places …., but we need to see that particularly in the U.S.”

Next, the unemployed “have to get back to work,” the CEO explained, “then confidence is going to creep back, but it will be slow. This is not going to be rapid turnaround.” 

When asked about the direction of stocks, Gorman said: “Oh, boy. My gut is, barring a devastating shift in the health care situation, that the equities markets have bottomed — though that doesn’t mean we couldn’t easily retest the bottom.” 

Volatility in April, he added, has come down from March, but “look, we [still] live in a very uncertain world for the next few months.” 

Leading in a Crisis

What’s Gorman most focused on as head of a firm with 80,000 employees worldwide? “We have millions of clients … trading billions of dollars, so our plant has to work,” he said. 

“With 90% of our employees at home, we’ve had almost no issues to our plant — it’s  remarkable,” Gorman explained.

The firm “wants to make sure our teams are properly coordinated given the remote isolation everybody’s going through,” he said. They’re already discussing “what it might be like to come back to work [and] starting to think about what the future might look like.” 

In addition, Morgan Stanley has cut back on stock buybacks. “We thought it was best to preserve our capital … [and] to help clients in need …,” Gorman explained.

Less Real Estate

“Clearly, we have figured out how to operate with much less real estate,” he said of the financial services industry. 

“But… [working from home all the time] is not how great organizations thrive, except for perhaps part of the week,” Gorman explained, adding “we want most people in the office most of time.”

“We want people to work together, so I would say I don’t see this as a permanent change. But, yes, we will have less footprint.”

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