By Lauren Tara LaCapra
(Reuters) - Morgan Stanley Chairman John Mack, whose sharp elbows and aggressive cost-cutting tactics earned him the nickname "Mack The Knife," will step down at the end of the year, handing the position to Chief Executive James Gorman.
Gorman, 53, will remain CEO, under a plan set out two years ago when Mack became chairman.
Mack, 66, is retiring in the midst of a significant overhaul. The second largest U.S. investment bank is scaling back much of its risk taking in trading, increasing its liquidity and relying more heavily on wealth management to generate stable income.
Mack, now 66, first joined Morgan Stanley in 1972 as a bond salesman and worked his way up through the ranks to become president and chief operating officer of Morgan Stanley Dean Witter in 1997.
He left in 2001 after losing to Philip Purcell in a battle for the CEO spot. In 2005, Purcell resigned as Morgan Stanley's performance lagged Wall Street peers and Mack became CEO.
When Mack returned to the bank, he received a standing ovation on the trading floor. He worked to strengthen Morgan Stanley's trading department, but also piled on risk, a move that generated a big profit in 2006, but hurt the bank leading into the financial crisis of 2007 to 2009.
Gorman was named CEO in 2010 and will become chairman on January 1, 2012.
"Working with the remarkable people of Morgan Stanley has enriched my life for more than three decades and helping to lead this great firm, most recently as chairman, was the greatest honor of my career," Mack said in a statement. "However, I made clear back in 2009 that I would serve in the Chairman role for two years and then move on. Now that time has come."
Mack will retire from a full-time role, but remain a senior advisor to Morgan Stanley.
Morgan Stanley shares were up 5.7 percent at $16.37 in afternoon trading after Mack's departure was announced, a much larger gain than other bank stocks.
(Reporting by Lauren Tara LaCapra in New York; editing by Lisa Von Ahn and Andre Grenon)
(This story is corrected to show the age of James Gorman from 52 to 53; error was due to erroneous information from the company)
