Will the rally in US mkts continue? Morgan Stanley answers

Excerpts from Your World at 10 on CNBC-TV18 Watch the full show » ALSO READ See what other FIIs are saying about the markets See what other experts are saying about markets See what Udayan Mukherjee is saying about the markets Nifty BSE | NSE 31/05/12 Are Mutual Funds betting on Nifty?

Q: The questions emerge about compensation, about the inequities that occur - on popular media/television this morning already asking people about the bonuses on Wall Street. Those questions - the inequality - is capitalism broke? What do you say to people with the stock market doing as well as it is doing all of sudden here and people still suffering having to take pay cuts just to keep their jobs?

A: It is a very hard issue and there is no one answer that will satisfy everyone but until jobs start getting created, people stop losing their houses in foreclosure and they're saving goes up, I think this is going to be a topic for a long time. Wall Street clearly has not done everything right but we are representing our shareholders, we are making money for them and to be honest with you - it is an easy target - not to be defensive because over the last two years, I have taken no bonus and when I had been paid, I got paid all equity. I have never taken cash.

But enough is enough and we are hiring people. We are doing our part. At least for a Goldman Sachs and ourselves, JP Morgan and few others we paid the TRAP money back. In our case we bought our warrants back which is over 20% return for the taxpayers but no one wants to talk about that. Comp is a big issue and we are all trying to do the right thing. At Morgan Stanley, we do have a clawback and most of the people at least the most senior levels over 50% of their compensation bill is in equity.

Q: You still feel in the Midwest where jobs are still lost and factories etc, there is a lot of inequality?

A: I am from North Carolina and my salary is USD 800,000, that is a lot of money anywhere and a lot of money here. I do understand that but at the same time it has to be broader than, lets just focus on the compensation, why do we focus on job creation.

Q: I know you have just got into Andrew Ross Sorkin's book -- 'Too Big to Fail', that recounts those days in September of last year when Lehman had just gone under, are you able to read the situation this passionately a year later or do you relive the emotions you were feeling at that time?

A: It's just amazing, I relived the motions. I get back there in a heartbeat, when I first started reading the article, I had to kind of grip myself because I am back just that where we were. I was in Russia not long ago and after meeting with chief of staff, he said its really passionate. When I took him through it, he got up from the table and came around and started hugging me because there was so much emotion. The view that I did in Morgan Stanley stood up to do what's right for our share holders and I think that's what he respected.

Q: There are couples of them that stand out for me, one is of Tim Geithner who was there the New York Fed sitting with a card with a list of names for potential merger partners for Morgan Stanley, he goes down the list in the scene, Morgan Stanley and Goldman Sachs, Morgan Stanley and Citigroup etc, the remarkable moment in our country's history when the government is getting involved in merger activity on Wall Street like that.

A: Exactly right, all I can say is that we played everyone on that dance card.

Q: Once people get to see the Vanity Fair excerpt and once they start to read Andrew Ross Sorkin's book and you know what I am going here. There is a scene in here. You are in the midst of negotiating a USD 9 billion capital infusion from Mitsubishi. You are on the phone and trying to get this thing done and you were repeatedly told by your assistant at one point that Tim Geithner who is the New York Fed President wants to talk to you immediately, Hank Paulson, Treasury Secretary wants to talk to you immediately - you keep fending this off and finally in a moment of desperation you are quoted that I can't even say this on television here as instructing the New York Fed President what he could do. Was that an accurate quote?

A: It was. We are in a battle and I had to get that money. I was not getting off the phone to talk to anyone.

Q: And you got the USD 9 billion?

A: We did. Mitsubishi has been just a wonderful partner.

Q: Have you heard from Mr. Geithner?

A: No, but I will see him. I am sure he will bring it up.