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When terrorists flew planes into the World Trade Center on Sept. 11, Morgan Stanley Dean Witter, the twin towers' largest tenant, scrambled to locate 2,700 employees who were in the skyscrapers and 1,000 in another building nearby. As of Wednesday, Sept. 19, six employees were still missing. Robert G. Scott, president and chief operating officer of Morgan Stanley Dean Witter, recently spoke with BusinessWeek Investment Banking Editor Emily Thornton about the attacks' impact on his company and Wall Street. Here are edited excerpts from their conversation:
Q: How long do you believe it will take for Morgan Stanley -- and Wall Street in general -- to get back to where they were before the attack?
A: On one level, we'll never be back to where we were. But from the point of view of our operations and being able to serve clients as we were doing eight days ago, many [investment banks] are able to do that today. We lost a retail branch and a lot of support space, as well as the office space for many of the groups that supported our retail business, but we have been able to relocate many [of our people].
I believe many of the [other] firms have almost full functionality. I think things are working smoothly on the settlement-and-clearing front as well. A Herculean effort on the part of everyone in the industry has gotten us to where [we can] operate the securities market very close to where we were eight days ago.
But there's a major real estate problem that has to be dealt with. The challenges of recovery will cause people to rethink their plans for backup sites. In the future, the recovery and backup facilities will be much more distributed.
Also, I think a lot of individuals who have been traumatized by this will be asking companies for alternatives to working in high-rise buildings in metropolitan areas. People are going to question the need for [all segments of a business] to be located in the same large building. We clearly have people who are going to ask us if we can't provide them with a work environment that's not in a 100-story skyscraper. We need to respond to that.
Q: Will there be a financial district in the future?
A: There's a logic to having the proximity. Today's communications technology makes that less necessary, but I think you'll still have a financial district. It's not just Wall Street. If you look at many other major cities -- London, Frankfurt, or Tokyo -- somehow there's a logic that creates financial districts.
[However,] I think people will also realize there are parts of their business that don't need to be in those areas. You'll end up with a new model that will have parts of businesses in financial districts, but you'll see distribution of other parts of the business into other areas.
Q: Could you share the background to Morgan Stanley's decision to repurchase shares this week?
A: We have had an authorization from the board to repurchase shares, and we have been in the market pretty regularly all the way back to the Morgan Stanley merger with Dean Witter. We have repurchased some shares since the tragedy, [because] we thought it was important to remind the market that we have the ability to do that. We had a very substantial authorization from our board that we could use if, in our opinion, the market pushed our stock down below what we thought was fair value.
Q: Was this a patriotic act? Or was this a matter of the value of the shares?
A: I'm not sure if I would use the word patriotic. It was an attempt to participate in a process that we expected would occur across the country -- and it did: companies helping to give confidence to the markets that there would be liquidity. The idea was to tell people this was traumatic, but basically, we still have the strongest economy in the world. We wanted to do something to maintain confidence in the markets. That's what we were focused on. It wasn't [about a buying] opportunity.
Q: In the weeks and months ahead, do you believe Morgan Stanley and other investment banks will be as active in using their capital to inject liquidity into the system?
A: I think so. As for Morgan Stanley, since we're a global firm, all through the crisis, even on Tuesday when the attack actually occurred, we were trading securities overseas. We haven't changed our commitment of capital to our clients. If anything, in specific circumstances, we made more capital available where the events created some sort of liquidity problem for clients in the market place.... And in specific circumstances, we'll be more aggressive to ensure that we maintain confidence in the markets. But so far that hasn't been necessary.
Q: Would you say this is the most liquid market there has been for a while, given the interest rate cut, the Federal Reserve's support, and what companies like yours are doing?
A: From a technical point of view, there's a substantial amount of liquidity, [thanks in part to] what the Federal Reserve has done, what central banks are doing around the world, and the approach the banks have taken.... For people using the markets and operating in the markets, there has been ample liquidity. When you have a shock to the system, as we've had, [concern about liquidity] jumps into everyone's consciousness. It was dispelled immediately. It was clear [almost immediately] that the Fed was going to be accommodating.
Edited by Patricia O'Connell
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