Sam Bankman-Fried takes the stand

This is an audio transcript of the FT News Briefing podcast episode: ‘Sam Bankman-Fried takes the stand’

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Marc Filippino
Good morning from the Financial Times. Today’s Friday, October 27th. And this is your FT News Briefing. The former golden boy of crypto took the stand in his own defence yesterday. Morgan Stanley announced its pick for a new CEO. Plus, Washington is boosting its military presence in the Middle East.

Felicia Schwartz
But it is a kind of delicate dance with a lot of potential for miscalculation, and I think that’s what makes people so nervous.

Marc Filippino
I’m Marc Filipino, and here’s the news you need to start your day.

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We got a little preview yesterday of Sam Bankman-Fried’s defence against the fraud charges he’s facing. The FTX founder told a judge that he thought he was following legal advice when he allowed his hedge fund to borrow money from FTX customers. That left FTX with an $8bn hole in its balance sheet. Bankman-Fried could face a lifetime in prison over the collapse of his crypto empire. The jury wasn’t present for yesterday’s hearing. The judge overseeing the case will decide what evidence can be repeated in front of jurors today. Just a heads-up, the judge seemed pretty sceptical about Bankman-Fried’s defence.

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So what’s leadership at Morgan Stanley looking like these days? Well, we got a clearer picture this week. Starting in January, the new CEO will be Ted Pick. He’s been at the bank for decades. Pick’s taking over from James Gorman, who announced earlier this year that he was stepping down. Here to talk about Morgan Stanley’s leadership change is the FT’s US banking editor Joshua Franklin. Hey, Josh.

Joshua Franklin
Hey, Marc.

Marc Filippino
So, Josh, James Gorman, those are some pretty big shoes to fill. What’s his legacy at Morgan Stanley?

Joshua Franklin
So James Gorman is a really interesting example of a Wall Street leader trying to go out on top. He’s been at Morgan Stanley for a long time now, 14 years. But often when executives are in these high-powered finance jobs, they find them very hard to give them up, especially when the going is good. And that’s what James Gorman is trying to do here at Morgan Stanley. He’s this very urbane, Australian wealth management executive, historically, took over the bank when it wasn’t in great shape at the start of 2010, and he’s really transformed it from an investment bank with a pretty uncertain future into an asset and wealth management juggernaut. And Gorman, now that he’s built this thing, is kind of trying to do a victory lap, say goodbye and pass on the CEO job to basically what seems to be his handpicked successor.

Marc Filippino
Yeah. Let’s talk about Pick for a second. How are investors feeling about him?

Joshua Franklin
So I think it’s a few things. I mean, this move was very well telegraphed at Morgan Stanley. It was known who the three leading internal candidates were for the job: Ted Pick, who runs investment banking and sales and trading; Andy Saperstein, who runs wealth management; and Dan Simkowitz, who runs asset management. And Ted Pick all along in the process was seen as being the frontrunner. So it’s not a big surprise that he ended up getting the job. As an added bonus, they also said that Dan Simkowitz and Andy Saperstein hadn’t just agreed to stay, but they were actually taking on expanded jobs. So they’re actually going to become co-presidents under Ted Pick. So it’s a real sign of continuity at Morgan Stanley and a bit of a rarity on Wall Street that a succession process can be handled like this with all of the leading candidates for the job staying around after the main person for the job has been picked.

Marc Filippino
Josh, it’s a weird time for the global economy. How does Pick handle that as he takes over Morgan Stanley?

Joshua Franklin
I think if you’re Ted Pick, yes, you have a lot of challenges, but you also are taking a seat at the table with some of the best cards of anyone in the industry in terms of a business that is very well understood, very well liked by investors, very well capitalised and with a very clear strategic direction. So I think the challenge for Ted isn’t so much managing the current environment, the challenge is more is like, what does he do in this job? How does he make a mark on Morgan Stanley in the same way that James Gorman did?

Marc Filippino
How do you improve on something that’s been going so strongly for so long right now?

Joshua Franklin
Exactly.

Marc Filippino
Josh Franklin is the FT’s US banking editor. Thanks, Josh.

Joshua Franklin
Thanks very much, Mark.

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Marc Filippino
For days now, US troops based in the Middle East have been on high alert. Armed groups have launched at least a dozen attacks on American military bases and personnel in Iraq and Syria since October 18. The militants staging these attacks, they’re backed by Iran. And Washington is worried that more might be on the way as Israel prepares for its ground invasion of Gaza. Here to talk about the escalating security situation is the FT’s Felicia Schwartz. She covers US foreign affairs and defence. Hi, Felicia.

Felicia Schwartz
Hello.

Marc Filippino
So, Felicia, like I mentioned, the groups staging these attacks are regional proxies of Iran, not Iran itself. But still, I have to imagine the country has some sort of stake in this.

Felicia Schwartz
Yeah. So it’s one, you know, former CIA official I interviewed this week said Iran is basically an arsonist, and they like to go around the neighbourhood and find the best arsonist in each place and support their arson and then let them do what they do well, which is start fires. They, you know, have an overall aspiration, in the words of some of these officials that I’ve spoken to, to, you know, one, get the US out of the Middle East. They want to be the regional hegemon, and they want the region to be oriented their way and to their committed to destroying or messing with Israel. They don’t want Israel to be kind of the dominant power in the region either. And everything that I’ve understood in my reporting is that it’s not that Iran is directly saying, you know, attack building x in this place, but they’re certainly not putting the brakes on or stopping these groups from sowing chaos or sort of prodding the US on the margins.

Marc Filippino
OK. So knowing this, how is the US responding to these attacks?

Felicia Schwartz
They have been rushing in all kinds of defences. There are two carrier strike groups. It’s like an aircraft carrier and some other associated ships that are operating in the region. One is going to the Persian Gulf, one is in the eastern Med. They’re rushing air defences. They are putting additional troops on standby. And so basically, you know, as Israel is figuring out what they’re going to do, the US is using this time to get their troops secured.

Marc Filippino
We’re obviously talking about a military response here. But is there also a more covert angle the US is looking at?

Felicia Schwartz
I think there’s been a huge diplomatic effort to get messages to Iran, whether that’s from the US directly or through other actors and parties and its allies like the Saudis or through the Lebanese, to make it clear to Iran that they are responsible for what happens to American troops and that it would be a mistake to escalate. And you know, they’re also supposed to be passing these messages as well to its proxy groups. But it is a kind of delicate dance with a lot of potential for miscalculation. And I think that’s what makes people so nervous.

Marc Filippino
And that nervousness, Felicia, comes from some uncertainty about just how much the conflict between Israel and Hamas could spread across the region, especially as Israel prepares to send troops into Gaza. How worried should we be about a wider war?

Felicia Schwartz
I think that there is real palpable fear in the US government and other western governments that this could spiral out of control and become something much larger. So I think there are going to be a lot of variables about where this goes in terms of how the Israelis respond, what happens in the West Bank if Hizbollah in Lebanon sees opportunity to get more involved, I think that will really colour what comes next. But I think there is a risk here that this becomes something larger.

Marc Filippino
Felicia Schwartz is the US foreign affairs and defence correspondent. Thanks, Felicia.

Felicia Schwartz
Thank you.

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Marc Filippino
You can read more on all these stories at FT.com for free when you click the links in our show notes. This has been your daily FT News Briefing. Make sure you check back next week for the latest business news. The FT News Briefing is produced by Kasia Broussalian, Sonja Hutson, Fiona Symon and me, Marc Filippino. Our engineer is Monica Lopez. We’d help this week from Sam Giovinco, Breen Turner, Michela Tindera, David da Silva, Michael Lello, Peter Barber and Gavin Kallmann. Our executive producer is Topher Forhecz. Cheryl Brumley is the FT’s global head of audio, and our theme song is by Metaphor Music.