John Mack retired earlier this year, but you won’t find him whiling away his days on the golf course. “I hate golf,” the 67-year-old former Morgan Stanley CEO says on a recent evening at Loi, a Greek restaurant on the Upper West Side. “Golf is only fun if you’re squeezing it in.” As he speaks, his iPhone buzzes. “I’m sorry, m’dear,” he says in his North Carolina drawl, reaching a Rolex-heavy hand into his pocket and silencing a text. Mack has just come from the office, and in a little over an hour, he is scheduled to meet a former colleague to talk business over the restaurant’s famous grape leaves. Mack is of Lebanese descent and has thick dark eyebrows whose tendrils act like a barometer of his moods. “Even though I’m retired, I’m very active,” he explains, tucking the phone back in his pocket.
This is something of an understatement. Like any titan emeritus, Mack has his hand in several nonprofits, including New York–Presbyterian Hospital, where as chairman of the board he presides over a Who’s Who of ex-CEOs of Too Big to Fail institutions, among them Sandy Weill (Citigroup), Hank Greenberg (AIG), and Richard Fuld (Lehman Brothers). Mack fits neatly into this crowd. But unlike his fellow board members, the man the Wall Street Journal once called “Mr. Morgan Stanley” has emerged with his reputation not only unscathed but burnished.
While the company he headed is a shadow of its former self—this year, Morgan Stanley is laying off 1,600 people, Moody’s is threatening to downgrade its credit rating, and the share price is down 32 percent over the past twelve months—Mack stock, it seems, is up. He’s taken a position as an adviser to the China Investment Corporation, the $400 billion Chinese sovereign-wealth fund, and joined the board of Rev Worldwide, a company that specializes in prepaid debit cards. Last month, Mack scored a high-profile appointment as a senior adviser to private-equity firm Kohlberg Kravis Roberts. “And those are just the things I can tell you about,” he says with a chuckle.
“Having John Mack on our board definitely adds a certain amount of credibility,” says Roy Sosa, the CEO of Rev Worldwide. “When companies like MasterCard heard we had John on our board, they were extremely delighted. I think had we been a publicly traded company, our stock would have gone up that day.”
At Loi, Mack runs down a list of his recent activities: He just got back from Southern California, where he sat on a panel at a “brain spa” organized by Ari Emanuel and met with some tech companies he was interested in working with. “From there, I went to San Francisco. I talked to a couple of CEOs; one of them was asking for advice,” he says. “The usual things.” Next, he will head to China, to speak about financial reform at the Boao Forum—“their little Davos,” as he puts it.
At some point, he will also have to find some time to work on his book, which he says is about leadership and the lessons he’s learned during his 40-year Wall Street career. Four years after the financial crisis nearly devastated the firm he was running, Mack is on the verge of becoming his own brand, like a Jack Welch or Jeffrey Immelt, a Trusted Name in Business. So, wait: How did that happen?
“He saved Morgan Stanley,” says Sosa, repeating the conventional wisdom that has become central to Mack’s post-crisis identity. “We fought to [the] death,” Mack told an audience of NYU students not long ago, recounting the now-familiar story of how, when government officials were pressuring him to give up and merge with another bank in 2008, he managed to procure an eleventh-hour $9 billion investment from Mitsubishi UFJ. This moment was dramatized in the HBO version of Andrew Ross Sorkin’s Too Big to Fail. “Tell [Geithner] to get fucked,” Mack, played by the guy from Monk with mascara on his eyebrows, hollers at his assistant. “I’m trying to save my firm!”
“It makes John Mack a real Patton-type character,” Byron Wien, the vice-chairman at Blackstone and a former colleague of Mack’s, said on Charlie Rose when the book came out.
“No surprise there,” replied Rose, who frequently hosts Mack on his show and whose ex-wife is Mack’s sister-in-law. In some ways, it isn’t surprising. Mack is a great storyteller and a media-friendly figure. And it’s true the deal he made with the Japanese helped buoy Morgan Stanley when it seemed in danger of sliding into the abyss. On the other hand, it was ultimately the government that was the firm’s real angel of mercy. In September 2008, the Federal Reserve accepted a last-minute bid from Morgan Stanley to become a bank holding company, which allowed them to borrow $107 billion. They later received $10 billion in TARP money. “John Mack saved Morgan Stanley to the extent that he got a giant government bailout,” says former TARP special inspector general Neil Barofsky. “Without that support, the company likely would have disappeared.” And, as others point out, had it not been for Mack, Morgan Stanley might not have needed saving in the first place. “He’s like the arsonist fireman,” a onetime colleague drily observes.
Before getting into his past, Mack needs a drink. “I would like a very cold beer,” he announces to the waitress at Loi. “The darkest one you have.”
Back when Mack started as a bond trader at Morgan Stanley, in 1972, things were a little different. “There were only 350 people,” he says. “They had $6 million in capital. Any time we priced a deal, every partner at the firm came to the meeting.” is first brush with disaster came during the 1987 stock-market crash. He was running the fixed-income desk, where he found one of his team members crying. “What’s wrong with you?” Mack asked. “He said, ‘I’m going to lose everything I made.’ I said, ‘Well, let me ask you a question: What did you start with?’ He said, ‘I started with nothing.’ ” Mack pauses for dramatic effect. “I said to him, ‘Well, then, make it back.’ ”
Mack was volatile and competitive, but, as one journalist would later point out, the man has been “described as charismatic so regularly that it could be part of his name,” and this quality helped earn him a loyal following as he was promoted through Morgan Stanley’s ranks. “He knows how to make people feel good,” explains a former colleague. Mack’s ascent stalled in 2001, however, after a bitter power struggle with the firm’s CEO, Philip Purcell, resulted in his leaving. He spent a brief period as head of Credit Suisse, until the board balked at his ambitious expansion plans; then he moved on to Pequot Capital, the multibillion-dollar hedge fund, which was in the middle of an SEC insider-trading probe. During the 27 days he spent there, his loyalists were busy orchestrating a coup for him at Morgan Stanley. Despite some initial reservations from the board—who thought Mack was a little too brash, too bold in his risk-taking, for the top job—by 2005, Purcell was out, and Mack was installed as CEO and chairman. “It was worthy of Aïda,” says Wien of the hero’s welcome Mack received at Morgan Stanley. “No elephants, though.” Instead, on his first day back, he was trailed by CNBC’s Maria Bartiromo as he walked around the trading floor, shaking hands.
In a PowerPoint presentation, Mack explicitly laid out his plans for the firm. At the top of his list were two areas he wanted to grow immediately: mortgages and derivatives. He also ratcheted up the firm’s leverage to the point where it was borrowing $32 for every dollar it had. For a while, his strategy worked: By 2006, the firm was neck-and-neck with its rival Goldman Sachs, and Mack took home a reported bonus of $40 million. But a year later, Morgan Stanley reported a trading loss of over $9 billion, the largest in Wall Street history. That was only the beginning. In the short time Mack served as CEO, the firm had swollen into a monster with billions of dollars of debt and a balance sheet full of toxic assets. “In many ways,” Mack tells me, displaying the folksy humility that has helped distinguish him from his peers, “it’s like, you know the old thing, put a frog in cold water, turn the heat up, they never know they’re being boiled to death.”
In the aftermath of the crisis, many of the CEOs of the country’s largest banks tried, when confronted with hostile questions from the press or apoplectic members of Congress, to explain or defend themselves. For his part, Mack instinctively grasped that this was a theatrical production and he had a role to play. While his peers stammered out limp apologies and shrunk from the spotlight, he stayed front and center, offering up a rich array of mea culpas with flattering undertones. “I remember my first year back at Morgan Stanley, we thought about paying ourselves a lot less money,” he tells me at Loi, lifting his eyebrows to form an expression that resembles regret. “And people would say, ‘You’ll be the laughingstock of Wall Street,’ ” he says, his voice rising, as if incensed by the memory. “ ‘You’re trying to make a point and it’s about your ego and you’ll take this money!’ So we paid ourselves a lot of money!” He takes a forceful gulp of beer. “And for the next few years I took no money because our performance sucked and I sucked. I said to my friend and chief administrative officer, ‘This is my fault, and I should have had the resolve to do what I thought was actually right.’ ”
In reality, Mack continued to receive a base salary of $800,000 through 2009 and took home $40 million in stock awards in 2007. But the forthrightness with which he admits mistakes is disarming and has mostly insulated him from the antipathy heaped on his brethren. So has his full-bodied embrace of regulatory reform. “I love it,” Mack announced at a 2009 conference, where he stood up and, like an AA member describing a run-in with his old crowd, related a story in which he claimed to have voluntarily called regulators after passing up an opportunity to finance a leveraged-buyout deal. “We cannot control ourselves,” he said he warned them. “You have to step in and control the Street.”
Of course, unlike, say, JPMorgan CEO Jamie Dimon, who has reacted to increased oversight as though the government has squeezed him into a fire-ant-filled chastity belt, Mack doesn’t have to actually implement the reforms he advocates. He stepped down as CEO in early 2010, before Morgan Stanley was forced to pare back its proprietary trading, and he gave up his chairman position last year, in favor of a part-time advisory role that allows him to pursue outside projects while still retaining an office and an assistant.
Predictably, the downsizing at Morgan has been painful. In January, Mack’s successor, James Gorman, announced a 20 to 30 percent pay cut, advising employees who were unhappy with it to “just leave.” “Just leave,” Mack chortles over his beer. “That’s the right answer!” But while the comment may have played well to an outside audience, it didn’t do much to improve the spirits of those toiling at the company. “All my friends who got left behind are miserable,” says one recently laid-off programmer, adding that most young Wall Streeters like him are heading to Silicon Valley, where you can make money without getting the stink eye from Barney Frank.
Mack doesn’t buy that argument, or the other one ignited by a former Goldman vice-president who last month resigned in a Times op-ed, citing disillusionment with an industry that has become overly focused on profit. “I can’t believe the Times even printed that,” Mack snorts. “Last time I checked, we were in business to be profitable. The guy’s been working at the firm for twelve years. I mean, it took you twelve years to figure out what you figured out?”
Even though he is now invested in Rev—a business described by its CEO as catering to people “who don’t trust banks, for whatever reason”—John Mack is still bullish on Wall Street, where huge fortunes can be lost and made back just as quickly. “Although the numbers have changed dramatically, I can’t think of a better business,” he says. “Even in a crazy market, to be a part of that fear and euphoria, to do a transaction no one else can get done … ” He drifts off. “I find the business hypnotic. I’m really addicted to it. I love it.” Draining his beer, he turns to go. “You have to do what makes you passionate and turns you on,” he adds. “And this really turns me on.”