Morgan Stanley is an American multinational investment bank and financial services company. It is headquartered at 1585 Broadway in Midtown Manhattan, New York City, with offices in 42 countries, including offices in many financial centers worldwide. Morgan Stanley is one of the largest investment banks by revenue. It is ranked 39th on the Fortune 500 and 21st on the Forbes Global 2000. It is considered a systemically important financial institution by the Financial Stability Board.
The company operates three divisions: institutional services, wealth management (Morgan Stanley Wealth Management), and investment management. The company receives revenues from market making for many types of financial products including equities, fixed income, and commodities (26% of 2025 revenues); net interest income (14% of 2025 revenues); investment management and wealth management (36% of 2025 revenues); investment banking (advisory for mergers and acquisitions and restructuring and securities underwriting, including initial public offerings) (12% of 2025 revenues); commissions and fees for clearing financial transactions (9% of 2025 revenues); and proprietary trading (2% of 2025 revenues).
Morgan Stanley was founded on September 16, 1935, by employees of J.P. Morgan & Co., including Henry Sturgis Morgan (a grandson of J.P. Morgan), Harold Stanley, in response to the Glass–Steagall Act, which required the splitting of American commercial and investment banking businesses. In 1997, the company merged with Dean Witter Discover & Co.. Dean Witter's chairman and CEO, Philip J. Purcell, became the chairman and CEO of the newly merged Morgan Stanley Dean Witter Discover & Co. The firm changed its name back to "Morgan Stanley" in 2001.
History
Early years (1935–1997)
Morgan Stanley traces its roots to J.P. Morgan & Co. After the U.S. Congress passed the Glass–Steagall Act in 1933, it was no longer possible for a corporation to have investment banking and commercial banking businesses under a single holding entity. J.P. Morgan & Co. chose the commercial banking business over the investment banking business. As a result, some of the employees of J.P. Morgan & Co., most notably Henry S. Morgan (grandson of J. P. Morgan) and Harold Stanley, left J.P. Morgan & Co. and joined others from the Drexel partners to form Morgan Stanley. The firm formally opened its doors for business on September 16, 1935, at 2 Wall Street, New York City, just down the street from J.P. Morgan.
In its first year, the company operated with a 24% market share (US$1.1 billion) in public offerings and private placements.
The firm was involved with the distribution of 1938 US$100 million of debentures for the United States Steel Corporation as the lead underwriter. The firm also obtained the distinction of being the lead syndicate in the 1939 U.S. rail financing. The firm went through a reorganization in 1941 to allow for more activity in its securities business.
From 1951 until 1961 the firm was led by Perry Hall, the last founder to lead Morgan Stanley. During this period, the firm co-managed the World Bank's triple-A-rated bonds offering of 1952, as well as introducing General Motors' US$300 million debt issue, US$231 million IBM stock offering, and the US$250 million AT&T's debt offering.
Morgan Stanley credits itself with having created the first viable computer model for financial analysis in 1962, thereby starting a new trend in the field of financial analysis. Future president and chairman Dick Fisher contributed to the computer model as a young employee, learning the Fortran and COBOL programming languages at IBM. In 1967, it established the Morgan & Cie, International in Paris in an attempt to enter the European securities market. The firm acquired Brooks, Harvey & Co., Inc. in 1967 and established a presence in the real estate business. The sales and trading business is said to be the brainchild of Bob Baldwin.
In 1996, Morgan Stanley acquired Van Kampen American Capital.
After the merger (since 1997)
In February 1997, the company merged with Dean Witter Discover & Co., the spun-off financial services business of Sears Roebuck. Dean Witter's chairman and CEO, Philip J. Purcell, continued to hold the same roles in the newly merged "Morgan Stanley Dean Witter Discover & Co." Morgan Stanley's president John J. Mack became the firm's president and chief operating officer. In 1998, the name of the firm was changed to "Morgan Stanley Dean Witter & Co." Originally, the name was chosen to be the combination of the two predecessor companies to avoid tension between the two firms. Eventually, in 2001 "Dean Witter" was further dropped and the name became "Morgan Stanley". The merged firm began expanding overseas operations: in 1999, Mack set up a joint venture in India with local partner JM Financial.
Morgan Stanley had offices located on 35 floors across buildings 1, 2, and 5 of the World Trade Center, and was the largest tenant of the WTC complex. Most of these offices had been inherited from Dean Witter which had occupied the space since the mid-1980s. The firm lost 13 employees during the September 11 attacks in 2001 (Thomas F. Swift, Wesley Mercer, Jennifer de Jesus, Joseph DiPilato, Nolbert Salomon, Godwin Forde, Steve R. Strauss, Lindsay C. Herkness, Albert Joseph, Jorge Velazquez, Titus Davidson, Charles Laurencin and Security Director Rick Rescorla) in the towers, while 2,687 were successfully evacuated by Rick Rescorla. The surviving employees moved to temporary headquarters in the vicinity. In 2005 Morgan Stanley moved 2,300 of its employees back to lower Manhattan, at that time the largest such move.
In 2003, NewYork-Presbyterian Hospital named the Morgan Stanley Children's Hospital in recognition of the firm's sponsorship of the hospital, which largely funded its construction through philanthropy. The initiative began under CEO Philip J. Purcell and was completed under John Mack. Employees at the firm have been involved with the hospital since the 1990s and personally donated to the construction of the current child-friendly building, which opened in November 2003.
In March 2005, a management crisis resulted in an exodus of key employees. Purcell resigned as CEO of Morgan Stanley in June 2005 when a highly public campaign by former Morgan Stanley partners threatened to damage the firm and challenged his refusal to aggressively increase leverage, increase risk, enter the sub-prime mortgage business and make expensive acquisitions; the same strategies that forced Morgan Stanley into massive write-downs, related to the subprime mortgage crisis, by 2007.
In December 2006, Morgan Stanley announced the spin-off of its Discover Card unit. The bank completed the spinoff of Discover Financial on June 30, 2007.Distribution of Discover Financial Services Common Stock Morgan Stanley Stockholder Tax Basis Information – Morgan Stanley. Retrieved January 27, 2021
In February 2007, Morgan Stanley announced the end of its Indian joint venture: the bank acquired its local partner's stake in the institutional brokerage business, and sold its own stake in the other businesses. The bank then set up a wholly owned subsidiary; the country head of Investment Management, Narayan Ramachandran, became CEO of the new subsidiary. Aisha de Sequeira, a managing director in the Mergers and Acquisitions group, was made Head of Investment Banking.
In December 2007, due to losses during the subprime mortgage crisis, Morgan Stanley received a US$5 billion capital infusion from the China Investment Corporation in exchange for securities convertible to 9.9% of its shares in 2010.
The bank's Process Driven Trading unit was among several on Wall Street caught in a short squeeze, reportedly losing nearly $300 million in one day. The bubble's subsequent collapse was considered to be a central component of the 2008 financial crisis.Patterson, Scott D., The Quants: How a New Breed of Math Whizzes Conquered Wall Street and Nearly Destroyed It, Crown Business, 352 pages, 2010. Amazon page for book. Specifically in an excerpt from "Chapter 10: The August Factor", in the January 23, 2010 Wall Street Journal.
The bank was contracted by the United States Treasury in August 2008 to advise the government on potential rescue strategies for Fannie Mae and Freddie Mac. Within days, Morgan Stanley itself was at risk of failure, with rapidly changing prospects, regulatory model and ownership stakes over the course of four weeks from mid-September to mid-October 2008.
The bank Morgan Stanley was reported to have lost over 80% of its market value during the 2008 financial crisis. On September 17, 2008, the British evening-news analysis program Newsnight reported that Morgan Stanley was facing difficulties after a 42% slide in its share price in two days. CEO John J. Mack wrote in a memo to staff "we're in the midst of a market controlled by fear and rumours and short-sellers are driving our stock down." By September 19, 2008, the share price had slid 57% in four days, and the company was said to have explored merger possibilities with CITIC, Wachovia, HSBC, Standard Chartered, Banco Santander and Nomura. At one point, Hank Paulson offered Morgan Stanley to JPMorgan Chase at no cost, but JPMorgan's Jamie Dimon refused the offer.Duff McDonald, Last Man Standing (2009)
Morgan Stanley and Goldman Sachs, the last two major investment banks in the US, both announced on September 22, 2008, that they would become traditional bank holding companies regulated by the Federal Reserve.Wall Street in crisis: Last banks standing give up investment bank status, The Guardian (London), September 22, 2008 The Federal Reserve's approval of their bid to become banks ended the ascendancy of securities firms, 75 years after Congress separated them from deposit-taking lenders, and capped weeks of chaos that sent Lehman Brothers into bankruptcy and led to the rushed sale of Merrill to Bank of AmericaGoldman, Morgan Stanley Bring Down Curtain on an Era, Bloomberg, September 22, 2008
MUFG Bank, Japan's largest bank, invested $9 billion in a direct purchase of a 21% ownership stake in Morgan Stanley on September 29, 2008. The payment from MUFG was supposed to be wired electronically; however, because it needed to be made on an emergency basis on Columbus Day when banks were closed in the US, MUFG cut a US$9 billion physical check, the largest amount written via physical check at the time. The physical check was accepted by Robert A. Kindler, Global Head of Mergers and Acquisitions and Vice Chairman of Morgan Stanley, at the offices of Wachtell Lipton. Concerns over the completion of the Mitsubishi deal during the October 2008 stock market volatility caused a dramatic fall in Morgan Stanley's stock price to levels last seen in 1994. It recovered once Mitsubishi UFJ's 21% stake in Morgan Stanley was completed on October 14, 2008.
Morgan Stanley borrowed $107.3 billion from the Fed during the 2008 crisis, the most of any bank, according to data compiled by Bloomberg News Service and published August 22, 2011.
In January 2009, the Global Wealth Management Group was merged with Citi's Smith Barney to form Morgan Stanley Smith Barney. Morgan Stanley owned 51% of the entity, and Citi held 49%. In May 2012, Morgan Stanley exercised its option to purchase an additional 14% of the joint venture from Citi. The division was renamed Morgan Stanley Wealth Management.
In October 2009, Morgan Stanley announced that it would sell Van Kampen to Invesco for $1.5 billion (~$ in ), but would retain the Morgan Stanley brand. It provides asset management products and services to institutional investors worldwide, including pension plans, corporations, private funds, non-profit organizations, foundations, endowments, governmental agencies, insurance companies and banks.