Friday, October 16, 2009

Misplaced Hero Worship: Morgan Stanley's John Mack on CNBC

Yesterday afternoon I happened to catch Bill Griffeth's fawning, softball interview with Morgan Stanley retiring CEO John Mack.

I find myself unable to disguise my total disgust with CNBC's continued glorification of inept CEOs, including sympathizing over how, in this case, Mack struggled to avoid his firm's demise, while carefully avoiding any question over Mack's responsibility was in leading his firm to that brink of disaster.
In his questioning of Mack, all Griffeth could do was look on in reverence as Mack regaled him with tales of seeking Asian funding to avoid being closed down by the feds.
If you look at the nearby price chart of Morgan Stanley, Goldman Sachs and the S&P500 Index for the past five years, you can see that Mack had spent the better part of his tenure since mid-2005 mismanaging the investment bank onto an index-trailing path.
Much ink has been spilled over Mack's mistakes since his return to the firm at which Sears/Discover Card's Phil Purcell outmaneuvered him after the 1997 merger of the two firms.
If I recall correctly, Mack installed poor risk managers, then had the firm go for broke by diving into trading and underwriting mortgage-backed securities. Then held back in the last nine months while risk taking actually began to pay off again.
In contrast, better-led and -managed rival Goldman Sachs was performing far better even before the crisis of last fall.
So, instead of asking Mack questions about how he managed to lead his firm to the brink of insolvency and possible government takeover or enforced sale to a rival, Griffeth painted Mack as some sort of late-hour hero, beset by forces outside his control, desperately fending off Hank Paulson and Tim Geithner as he rescued Morgan Stanley with funding from new outside investors.
It makes me want to throw up when I see such shallow, gullible, misleading reportage. Much like Wall Street Journal veteran Peter Kann noted in an editorial on which I commented in this post, CNBC is rapidly heading down the road that led to the demise of printed newspapers.
Yesterday's interview of John Mack contained several aspects of that demise, e.g., shallow questions from Griffeth and a biased, flattering treatment of the subject, rather than hard-nosed questions that an intelligent, informed viewer would have posed.
Rather than champion capitalism and free markets, this sort of softball journalism at CNBC contributes to the weakening of our economic system. Griffeth breathlessly spoke about how narrowly Mack avoided Morgan Stanley going out of existence.
Guess what? Few financial service companies from thirty years ago are still around and independent. Poorly run investment banks and brokerages, such as Lehman- twice-, First Boston, Kidder Peabody and Salomon Brothers get taken over. Or perish.
Bill Griffeth needs to get a better sense of the reality of financial markets and the life-and-death cycle of those firms engaged in the rough-and-tumble world of securities underwriting and trading.
If a live televised interview on CNBC of the CEO of one of the less-well run investment banks doesn't feature questions about how Mack could have caused such massive, self-induced damage to Morgan Stanley, what will?

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