CRUZ BECOMES CASUALTY OF WALL STREET'S CREDIT CRUNCH

Global Finance, Jan 2008 by Platt, Gordon

UNITED STATES

After rising higher than any woman on Wall Street, Morgan Stanley co-president Zoe Cruz stepped down, effective December 1, apparently taking the fall for billions of dollars in mortgage-related losses at the firm.

Cruz, a 25-year veteran of Morgan Stanley who was considered a potential successor to chairman and chief executive John Mack, joined Bear Stearns' Warren Spector, Merrill Lynch's Stanley O'Neal and Citi's Charles Prince as members of the dreaded subprime mortgage club of former high-ranking executives.

Cruz, 52, was promoted to co-president in 2005 by Morgan Stanley's then-CEO Philip Purcell. She received about $30 million in compensation in 2006, making her Wall Street's highest-paid female executive. Although she will not receive any severance pay, she will be able to cash in tens of millions of dollars in shares and stock options accumulated during her career at the bank.

With a freshly minted Harvard MBA, Cruz joined Morgan Stanley in 1982 as a foreign exchange trader. She became a managing director in 1990 and was named head of the fixed income, commodities and foreign exchange division in 2000.

Her departure heightened fears that Morgan Stanley could be facing further mortgage-related writedowns on top of the $3.7 billion announced on November 7. As Global Finance went to press, the firm was close to announcing its fiscal fourthquarter earnings.

Robert Scully, who was named co-president along with Cruz in 2006, will remain at the firm in the newly created office of the chairman. Cruz was responsible for the division that made the ill-fated mortgage investments, while Scully oversaw asset management and private equity. Walid Chammah, former global head of investment banking, and James Gorman, who ran the global wealth-management group, became the new co-presidents. -Gordon Platt