Too Big to Fail [234]
“Did you see this irresponsible piece of shit in the Times?” Nides asked when he got Mack on the phone. Mack, however, only read the Wall Street Journal, the Financial Times, and the New York Post, having canceled his Times subscription in protest after the Sulzberger family pulled its money from Morgan Stanley because one of its asset managers had decided to run a proxy contest against the Times ownership.
Now Mack had reason to be upset at the Times all over again. And he and his colleagues were furious with Pandit, who they were convinced must have leaked it.
“You didn’t say this, did you?” Nides asked.
“No, no,” Mack insisted. “I never said that; I definitely didn’t use those words.”
Nides knew he needed to challenge the veracity of the quote immediately. He was already getting calls from other news organizations.
“What fucking kind of reporter are you?” he berated one of the article’s authors, Eric Dash, when he reached him on his cell phone. “You have to rescind the story!”
Mack, meanwhile, prepared to address his employees for the second time in four days, eager to offer them reassurance, especially after the Times story. He had invited Eugene A. Ludwig, chairman of Promontory Financial Group and one of the authors of the editorial in the previous day’s Wall Street Journal advocating for a RTC-like structure, to join him this morning as his adviser.
Battling a cold, his glasses slipping down his nose, Mack stood on Morgan Stanley’s main trading floor, his speech piped in to its employees around the world. He spoke in a plain, unscripted manner, his North Carolina accent perhaps more pronounced than usual.
“You know you’ve seen the cash position, you’ve seen our earnings, ah, all that stuff, unlike what people said about other firms, ah those numbers are real numbers,” he told them. “We’re clean, we’re making money. We made a lot of money the last eight days also. But it doesn’t make any difference. We deal in a market today that financial chicanery, rumor, and innuendo are much more powerful than real results.”
He related a phone conversation with a “a good friend,” a hedge fund manager who confided his fears about Morgan Stanley. Mack reassured the man, only to receive another call four hours later from the same fund manager about still another market rumor. “My point being, no matter what we say, there’s another rumor that pops up.”
Mack acknowledged that the firm was examining all its options, while expressing bewilderment at how the industry had been turned upside down.
“What I find remarkable is not too long ago, two months ago, four months ago, people said the Citibank model was broken—ah, complicated, big, global, unmanageable. And now our model’s broken. Is our model—and I include Goldman Sachs—is our model broken because we are not part of a bank? Is our model broken, because we’ve consistently in the last three quarters delivered good earnings? Is our model broken because we could not have regulators who stepped in and take strong stands? That might be the issue here.
“I think the issues are: How do you get through chaos? This is chaos. It pains me to go on the floor and see how you guys look.”
Mack then addressed the most sensitive issue for his employees—the selling of stock. According to SEC regulations, employees could sell only during certain designated periods, such as immediately following an earnings report—which meant at the present.
“I know this is a window period,” Mack said, “and I know some of you are very scared—well, maybe all of us are very scared. You want to sell stock, sell your stock. I’m not going to look at it and I don’t care. I’m not selling, and there, well, John, you’ve got a lot of it, you don’t have to worry about it…ah, you know, I do have a lot and I do worry about it, but I really care much more about your getting peace of mind. So if you want to sell, sell. Do it.”
When the time came for questions from the staff, Stephen Roach, Morgan Stanley’s unfailingly bearish economist, asked a pointed question about the shorts: