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John Mack, aka Mack the Knife, steps down from Morgan Stanley after 30 years

Chairman who started his career at the bank in 1972 will retire at the end of the year

Mack the Knife is out. Morgan Stanley has announced that its hot-shot chairman, John Mack, will be retiring at the end of the year, ending a controversial reign at the top of one of Wall Street’s most famous banks.

Mack, 66, the sixth son of Lebanese immigrants, is a Wall Street legend who started his career at Morgan Stanley as a salesman in 1972 and became president in 1997. He earned his nickname after a savage round of cost-cutting when he managed the fixed income division at Morgan Stanley.

In 2001 he was forced out after a boardroom coup, and went on to become chief executive of Credit Suisse First Boston. The knife went to work at CSFB too, chopping 10,000 jobs. Mack returned to Morgan Stanley in 2005, replacing Phil Purcell, the man who had deposed him in a bitter power struggle.

Mack received a standing ovation when he returned to the bank. He worked to strengthen Morgan Stanley’s trading department but also increased the bank’s risk before the financial crisis of 2008.

Last year he was asked by government officials investigating the financial collapse about the bank’s investment in toxic assets. “We did eat our own cooking and we choked on it,” Mack said. “We kept positions and it did not work out.”

The bank came close to collapse after the bankruptcy of Lehman Brothers. Morgan Stanley borrowed 7.3bn (£68bn), the most of any bank, according to data compiled by Bloomberg News using information obtained from Freedom of Information Act requests.

Mack received a m stock bonus in 2006, then a record. But the bank’s profits proved illusory and he refused a bonus for the next three years, making do with his 0,000 salary. He was the only Wall Street boss to reject his bonus three years in a row.

Mack has been chairman since early 2010. He is expected to retain a senior advisory role, and is working on a book about his years on Wall Street, due to be published next September. He will be replaced by James Gorman, the chief executive. Gorman, too, has earned himself a nickname at the bank, albeit a somewhat less glamorous one. The bank boss apparently despises having his name shortened so much that he is know as James “don’t call me Jim” Gorman.

Gorman received total compensation in 2010 valued at .2m, more than doubling his pay awarded in 2009.

In a letter to staff, Gorman wrote that Mack had “contributed immeasurably to Morgan Stanley’s success during his more than 30 years here”. He said that Mack had helped stabilise the firm and sharpen its focus after his return in 2005.

“On a personal note, John has been a valued mentor and friend to me and so many other people here at Morgan Stanley,” wrote Gorman.

“He has inspired us with his passion for the firm and for this business, and I know we all will miss his good humour and competitive spirit, which have energised us all through the years.” © 2011 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds