Morgan Stanley faces a new era

There was a day, not too long ago, when Goldman Sachs and Morgan Stanley were mentioned in the same breath--the twin powers of Wall Street. But over the past year, Morgan Stanley has stumbled, while Goldman Sachs has continued to soar. In many ways, Goldman now stands alone.  

What will it take for Morgan Stanley to reclaim the rare air it once occupied?   

It boils down to CEO John Mack, about whom opinion is divided. eFinancial News Online notes that Richard Bove of Ladenburg Thalmann thinks the bank would have been better off with Phil Purcell, whom he replaced; few others would go out on that limb.     For now anyway, Mack still gets the benefit of the doubt from shareholders, analysts and directors, but that may not last forever. If he can't right the ship, the board will have some serious soul searching to do. Currently, the board seems content to let Mack work to extricate the firm from the overall mortgage mess--a market he once sought.  

For all the recent pain, one could argue that Morgan Stanley was very close to replicating Goldman Sachs' performance through the credit crisis. But alas, it was not to be. Most would agree that the bank has yet to show Goldman's trading discipline and savvy--recall the mystery trader who lost $120 million, not to mention Morgan's disastrous bets on electricity. Make no mistake, Morgan wants Goldman-like trading results.    

Despite the hits, it remains among the strongest banks on the Street. Morgan's investment banking prowess is second only to Goldman--a fact that it may just have to get used to. - Jim