Bankerspeak of the day, James Gorman edition

By Felix Salmon
February 6, 2011
Lucy Kellaway for picking up on this classic bit of bankerbollocks from Morgan Stanley's James Gorman:

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Well done to Lucy Kellaway for picking up on this classic bit of bankerbollocks from Morgan Stanley’s James Gorman:

WSJ: Why has fixed income been so tough to turn around?

Mr. Gorman: We have never had the kind of foreign-exchange business that the global [commercial] banks have had. And we’ve focused less on building pure flow, client-driven businesses where you need more people. We’ve reasserted our identity around those client businesses. What we’re doing strategically is going back to the future. It’s a sweet spot where we’re very comfortable.

This is almost the platonic ideal of the form. Gorman starts off by changing the subject — it’s far from clear why having a large FX business would make it easier to turn a fixed-income desk around — but then rapidly veers off into the kind of consultant-speak best measured in femtograms. (Gorman used to work for McKinsey.) The really hilarious thing, of course, if you take any of this stuff seriously at all, is the way that Morgan Stanley seems to be trying to reasserting its identity around the businesses where it hasn’t been focusing. But hey, so long as they’re comfortable in their back-to-the-future sweet spot.

The real answer to the question, of course, is “fixed income desks thrive by taking risk, we made a deliberate decision to derisk aggressively at the height of the financial crisis, and if you start seeing lots of profits from the fixed-income desk in future, you can probably assume we’ve learned nothing”. But that would require an honest CEO who speaks English. In reality, nobody with either trait would ever be considered for the job.

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6 comments so far

I think “fixed income” typically refers to a host of activities, including FX.

Posted by MitchW | Report as abusive

The issue at MS is with FICC. FICC is Fixed income, commodities and CURRENCIES. One would expect a financial journalist to know this.

One would expect a financial journalist to know that traditionally commerical banks have dominated the FX business – due to certain extent to the natural business they get from international trade flows – and that in the last year or so banks like Deutsche have been coining it in this field.

Pushing the boat out a bit, one might expect a financial journalist to know that alot of the profits in FX is in customised derivatives, something that in the 90s MS was a leader in.

But that is just in an ideal world.

Posted by Danny_Black | Report as abusive

thanks to both MitchW and Danny_Black for missing the point.

The question wasn’t “would you like to complain about commercial banks’ FX desks,” it was “Why has fixed income been so tough to turn around?” By definition, the answer cannot be, “we were never in fixed income, commercial banks do that.”

Posted by johnhhaskell | Report as abusive

A fine example of the kind of idiotic jumbo jumbo that drives the modern world of Klepto finance.

Posted by williambanazi7 | Report as abusive

johnhhaskell, I assume this bit was a typo “we were never in fixed income, commercial banks do that” – you meant “we were never in FX, commercial banks do that”. Even so that is simply not true. A large portion of MS profits in the 90s were based on FX based structured products. With people investing in countries that have different currencies from the base currency, FX is a natural bolt-on and when dealing in anything other than spot FX there is a natural fixed income component – you are promising to pay X in a currency A in the future in return for Y in currency B and FX is where alot of that profit is these days apparently. So he answered the question, the journalists were just too stupid and ignorant to understand it but apparently that is now par for the course.

Posted by Danny_Black | Report as abusive

Having spent the last 30 years in fixed income, it’s still not clear to me exactly what he was getting at. Yes, FX may be a component of fixed income, but at most banks and brokerage houses, they are separate departments with different management and mandates. So, let’s just say he didn’t answer the question as well as he could have.

Posted by Bernanke | Report as abusive
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