Morgan Stanley CEO Should Be Safe

Morgan Stanley is reportedly facing a criminal investigation, but it's hard to see how the fallout could hit its CEO James Gorman, who replaced John Mack (above), the current chairman.
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) --

Morgan Stanley's

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name has reportedly come up in relation to what now appears to be a wide-ranging

criminal investigation into collateralized debt obligations

, but the bank's CEO, James Gorman, can breathe a bit easier than Lloyd Blankfein, his counterpart at

Goldman Sachs

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Blankfein has faced persistent questions about whether he can keep his job since the

Securities and Exchange Commission

charged Goldman with civil fraud on April 16. Rochdale Securities analyst Richard Bove stated in a May 2 report that Goldman would have to remove "high level executives...both in the management suite and from the Board of Directors." Bove has also singled out Blankfein for criticism on at least two occasions for his handling of the widespread criticism of Goldman.

The Wall Street Journal

also raised the question of whether Blankfein would lose his job in an article it ran on the front of its "Money and Investing" section May 5.

Though Blankfein gave a strong performance at the

Goldman Sachs annual shareholder meeting

last week, further bad headlines for Goldman may turn up the heat on Blankfein once again.

Wall Street CEOs have turned over at an alarming rate since the crisis began.


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Bank of America

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Merrill Lynch


Bear Stearns

leaders have all step down under fierce criticism within the past two and a half years.

Morgan Stanley's Gorman is unlikely to attract a similar degree of scrutiny. He became CEO at the start of the year, but the debt deals at the center of the criminal investigation, known internally at Morgan Stanley as the "Dead Presidents" deals, were put together in mid-2006, according to

The Wall Street Journal

, which first reported the investigation. Morgan Stanley told the newspaper it has not been contacted by the Justice Department about the deals in question.

More important, Gorman, who joined Morgan Stanley in August 2005, had been overseeing Morgan Stanley's retail brokerage operations, a completely separate area of the company. Morgan Stanley shares were down more than 3% in early afternoon trading following

The Wall Street Journal

report of the investigation. Morgan Stanley investors need to keep an eye on developments, but any potential fallout seems unlikely to threaten the job of the new CEO.


Written by Dan Freed in New York