Morgan Axe Falls on Co-President Zoe Cruz Following $3.7B Mortgage-Related Losses

Following the close Thursday Morgan Stanley announced it was letting go of Co-president and CEO-heir apparent Zoe Cruz on the heels of the investment bank's November 7 announcement (full summary) it was writing down $3.7 billion in mortgage-related losses, resulting in a net loss of up to $2.5 billion in Q4 earnings. In addition to the writedowns in a part of the business for which Cruz had considerable responsibility, Cruz's management style had been called into question in the past, and was described by some as "polarizing." Cruz spent the last 25 years at Morgan, gradually working her way up its corporate ladder. She was widely considered one of Wall Street's most powerful women. Replacing Cruz are current Chairman and CEO of Morgan Stanley International, Walid Chammah and current President and COO of the Global Wealth Management Group, James Gorman. According to the press release, "on a day to day basis, Institutional Securities will report to Mr. Chammah and Wealth Management and Asset Management will report to Mr. Gorman." Cruz's Co-President, Robert Scully, is joining a new "Office of the Chairman." Morgan shares were down 0.76% in after hours trading on the news, following a 2.17% drop Thursday.

Sources: Press release, Wall Street Journal, New York Times, Reuters, Forbes
Commentary: Morgan Stanley: Ensuring Mortgage Market Problems? • Morgan Stanley's Q4 Writedown To Bite Earnings By Up To $2.5 Billion •
Stocks to watch: MS. Competitors: GS, MER, BSC. ETFs: IAI, KCE, IAK, KIE
Earnings call transcript: Morgan Stanley F3Q07

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