Mack Out as Morgan Stanley CEO, Co-President James Gorman In

John Mack, the current CEO of Morgan Stanley will hand the reins to Co-President James Gorman January 1, according to Bloomberg:

“I’ll stay as chairman at least for two years working with James, working with clients,” Mack, 64, said in an interview today. “I’m not leaving this firm. This firm is part of my DNA.”

Mack spent most of his career at Morgan Stanley. He left in 2001 after more than 20 years before re-joining as CEO in 2005 and leading the firm through a financial crisis that wiped out Bear Stearns Cos., Lehman Brothers Holdings Inc. and Merrill Lynch & Co. One week after Lehman’s Sept. 15 bankruptcy, Morgan Stanley and larger rival Goldman Sachs Group Inc. converted to bank holding companies, ending their history as independent securities firms to win the backing of the Federal Reserve.

Morgan Stanley shares fell as low as $9.68 on Oct. 10 before the firm won a $9 billion investment from Japan’s Mitsubishi UFJ Financial Group Inc. and $10 billion from the U.S. government on Oct. 13. Mack has since repaid the Treasury and the stock closed in New York today at $28.64.

Gorman, 51, joined Morgan Stanley in August 2005, less than two months after Mack became CEO, to run the retail brokerage division. He previously worked at Merrill Lynch & Co., now part of Bank of America Corp., which is Morgan Stanley’s biggest competitor in providing financial advice to individual investors. Before Merrill, Gorman worked at strategy firm McKinsey & Co., where he advised financial clients including Merrill.

Earlier this year, Morgan Stanley agreed to buy control of Citigroup Inc.’s Smith Barney brokerage unit to form a joint venture called Morgan Stanley Smith Barney. The venture, in which Morgan Stanley holds a 51 percent share, has more financial advisers than any other retail brokerage.

Morgan Stanley’s financial performance has lagged behind peers in recent months. The firm reported its third consecutive quarterly loss for the three months that ended in June, while rival Goldman Sachs made record earnings led by trading gains.

Mack said the firm hasn’t embraced a strategy of taking fewer trading risks. He said that the company’s traders are more focused on dealing in liquid securities than they were before the crisis.