Print this

Email this

Submit a Question

» Video of the full interview » Grasso profile » Aug. 23 interview with William Sharpe

KAREN GIBBS: FORTUNE magazine has titled you the man who saved Wall Street. And from the looks of all the activity going on around here, you would never know September 11th happened. How do you feel about being called the man who saved Wall Street?

DICK GRASSO: I think I am obviously very blessed to have that but it was a true collected partnership. My colleagues from this industry, CEOs, of the major broker dealers got together with me, they were locked arm the entire five and a half days until we knew we had restored our capacity to trade and it was a partnership not just in the financial services business, but we needed the City. And we had (then-Mayor) Rudy (Giuliani) and his team every step of the way. We had the great people from Verizon and ConEdison and we had help of course, great help from the State, the governor and his team, and the president. The president's team was right here. So I'm blessed, but I must tell you that's a title shared by many people, Karen.

GIBBS: Can you tell me the thoughts that went through you mind, as a New Yorker, and as chairman of the largest exchange in the world when September 11 and the events unfolded.

GRASSO: First and most importantly, the thought ran to the people. I had 149 people in the South Tower. My entire enforcement division was housed there. God was on our shoulder that day. We got them all out. I had many friends in that tower who didn't get out. I had three of my members who didn't get out. So you first and most importantly never lose perspective -- it's human life (first), and then stock trading.

And we have so many wonderful members of the financial community who were lost that day. After you realize that you've lost more than 2,800 people here at the trade center, more than 200 at the Pentagon and another 100 or so in the fields of Western Pennsylvania, you begin to set in motion a perspective and a reality that says yes they killed thousands of innocent people and they've taken billions in property and destroyed it but the real target of the attack is this. It's the American way of life. The freedom...

GIBBS: It is truly a symbol.

GRASSO: It is America's way of valuing for the world the true global economy each and every day, every minute of every trading day. And the way you can most honor those people whom we lost, is to bring it back, fast and better than ever.

And I must say to the credit of everyone in the ranks I mentioned, we worked continuously side by side: the mayor and his team; the governor and his team; the president's team whom he sent here, starting with the Treasury Secretary and his top deputy, Bill McDonough; the president of the New York Fed; the president of Verizon; the president of Con Edison; the CEOs of all those broker-dealers and the workers. The wonderful women from Con Edison and Verizon; men and women who stood in waist-deep water trying to reconnect electricity, trying to reestablish voice and data switching.

And we all had a common goal. The CEOs of the best broker-dealers sat around a table with me, and as you know they’re pretty competitive people. But for that moment in time, they took off their competitive jerseys and they put on their American flags, and they said:

"Whatever my competitor doesn't have, I'm going to give to that firm so that we can bring it back. We can send a message that thousands have died, billions have been destroyed, but you failed. The American way of life burns brighter than ever before."

That's what that restoration process was all about.

GIBBS: You did an amazing job of bringing consensus among, as you mentioned, Verizon and Con Edison, and bringing this trading floor back up to speed in four trading sessions. It was the first time we had seen the stock market close for four consecutive days since 1933. And you did it and there were no glitches.

How? And how are you trying to, now -- you're in an unenviable position of not only trying to prevent -- but also prepare for another horrific event that would stop trading? What are you doing?

GRASSO: Well the answer to your first question is, I didn't do it, thousands of people did it. All of those whom I mentioned, and the ultimate partnership between the public sector and the private sector -- that's how we got it all back together.

And I am so very proud of all of those people, from elected officials to line workers, because they understood getting the market back up and operating was the best way of saying "You've lost. The murdering terrorists have lost."

In terms of going forward, the important thing to remember is that we operate an infrastructure that can be geographically diverse. Our technology is geographically diverse, our people are not.

We’re in the process of planning (to) literally split this business in half: put half of our people in one site, half in the other. So if, God forbid, we were to ever get hit again and suffer perhaps total casualties, the other half of our community would be there and ready to operate.

GIBBS: Would you be dividing it, as well, along technology challenges -- the voice and data equipment that is so desperately needed.

GRASSO: Absolutely, that's all been done. The last piece to the puzzle is taking half of the three thousand people who populate these trading floors and putting them somewhere else.

GIBBS: Another trading floor separate and distinct from this one. So there would be no interruption in trading activity.

GRASSO: Exactly right. You know, we have a second site which, if God forbid, something were to happen here, and people were to survive, I could recreate this market in less than 36 hours, in another site that we’ve invested more than $25 million in.

What I cannot do is deal with the just incredible consequences of all of us dying in one site. And so we are going to separate our business, and put half of our operating assets and half of our human assets in a separate, and very, very safe location.

GIBBS: But you know that was the first shoe. We were attacked from the enemy without. Then all of a sudden we had an enemy within. Corporate scandals from accounting to other types of malfeasance really kind of eroded investor confidence. You have been at the forefront, the vanguard of cleaning up the corporate situations. Can you tell me about that?

GRASSO: Well it's a terrible, it's a terrible cloud that's been cast over capitalism by, I would say a small number, but one is one too many, of CEOs or CFOs, who have not met their fiduciary responsibility to their owners and to their employees. We've put together our board did last February a blue ribbon committee co-chaired by the comptroller of the state of New York; the former chairman and CEO of Time, AOL Time Warner and the former chief of staff to the president, Leon Panetta; all of whom are board members here and we set out to answer the question what should the stock exchange do from a corporate governance standpoint to send the message to 85 million investors in this country that this kind of behavior is unacceptable.

But we knew that we could not do it alone. And so the SEC had to do its part and they have, the Congress had to do its part and it has, and of course the President was a beacon sending the message that if you did something that was against the law you are going to do hard time. And I think investors are responding to that. We've got some economic challenges in the short term but let us not lose site of fact that this is the strongest country on earth and the strongest economy the world has ever seen.

We will rise. We will rise as we did from the ashes of 9/11, we'll rise from the scandals of Adelphia and Enron and WorldCom and we will be stronger free market capitalism than ever in our history.

GIBBS: So you are convinced that the moves you've made are going to, at least if you can't legislate honesty, it will certainly ferret out the bad guys and leave the barrels not spoiled.

GRASSO: Creating a culture of engagement, a partnership much like the partnership that restored the markets in four days. There was a partnership between the executive branch, legislative branch those in the regulatory arena and the private sector that says very simply if you fail to meet your obligations, we will pursue you, prosecute you and put you in jail and you won't be playing tennis all right, you'll be cracking rocks.

GIBBS: Well you do have still one other piece of the puzzle and that's the investor. The crumbling investor confidence in not only the stock market but the management of their 401K's has really shown a drop in not only trading volume but revenues at the New York Stock Exchange, profits in your second quarter down almost 72 percent. I know a lot of that was due to technology costs, but what can we do to restore investor confidence and get these people back into the market and not have a lost generation of investors similar to what we saw after the Great Depression?

GRASSO: Well I think it is so very important, your question is a good one. I don't invest for the short term here at the NYSE. I'm not a public company -- I'm a private entity with a public purpose. That's very important, Karen. The public purpose of this institution is to serve 85 million investors.

So, if I have to pour money into educational programs, into better detection technology that will ferret out corporate misconduct, if I have to spend money so that my profits go down but investor confidence goes up we'll all be fine in the long term. And we're doing that right now.

I'm not paying attention on much as you would be surprised to hear me say that. I'm not paying to short-term profitability because I know profitability will return when the public feels good once again about investing. So we've got to create the tools and we've got to create new platforms for investor education for better director education. I want strong, tough, independent directors in every board room of our 2,800 companies asking the right questions so that you won't have another Aldelphia, or you won't have another WorldCom or Enron. And can you guarantee that, clearly not; but you can do all that you possible can and tell the American public that you are doing that.

You know the investor is a lot more sophisticated than oftentimes we give he or she credit for. They are not looking for a guaranteed profit. They are looking for guaranteed fairness and high integrity. You're right, you don't legislate that -- you create a culture. You create a creative strain between independent directors and management. You never ever fail to remind those independent directors that they walk into that board room not for the private entertainment of management but to represent those 85 million shareholders who are not coming in the board room. So you create that culture and then everything will be just fine.

GIBBSof spiritual evangelicalism here and it's a beautiful thing and we're wondering now it's almost like you believe in this for the long term, how do you translate that to investors as you said are so preoccupied with these short-term movements?

GRASSO: Karen ask the very fundamental question. Who owns the New York Stock Exchange? Members of the exchange own merely the brick and mortar. The real owners are 85 million Americans who own the 2,800 great companies that we're privileged to trade. Those are my owners. Those are the people to whom I'm accountable to. To do a good job for them is to do a good job for this country.

You need the finest of laws certainly, you need the finest of regulations and we have both in this country. Our new legislative initiative which the President signed just recently, coupled by the tough initiatives from the SEC who is doing a phenomenal job, coupled with our new listing requirements, add all of that together and the one last piece to the puzzle is to say to the American investor we're not happy that you lost money and believe me we feel you pain because we're part of that process. You know if you take direct ownership in the country and 85 million and indirectly there are more than 200 million Americans who own this institution.

Serving them, doing a good job for them means not only will I have plenty of trading capacity but I'll have the finest enforcement people. I'll have the highest industry standards. I'll have companies who will consider it a good housekeeping seal of approval to be able to say we've met those tough new standards at the big board. Cook all of that into the pot and then never forget the economy that we're privileged to live in is the strongest the world has ever known. It's going to be just fine. And I don't take the short view because this is our 211th year of operation. I almost feel as though I’ve been here a good part of that time -- it's only been 35. But that's what built this country, the small business, that’s what built this market the small investor -- We're going to be just fine.

GIBBS: Now I know that there are two people anxiously waiting in the wing. You've got Catherine Kinney and Robert Britz named co-presidents -- the first time you've had a woman president here -- and I think they are kind of eyeing your job.

GRASSO: I am very proud of both of them. I'm very proud. I would be very disappointed if they didn't eye my job. And that's my greatest challenge and the greatest gift I can give to this exchange, to be able to say one day, choose either of my partners and the one thing I can tell you is your next chairman will be the greatest chairman you've every had.

GIBBS: You don't have any plans of resigning or retiring any time soon? Do you?

GRASSO: Not unless you know something I don't.

GIBBS: I certainly don't.

GIBBS: Well let's talk about now, the revitalization of downtown. The New York Stock Exchange is an anchor here. You're not leaving are you?

GRASSO: Absolutely not. We've been here for 210+ years. We continue to make major investments in lower Manhattan. This building -- realize that we have just opened a new $70 million trading room, our fifth trading room. We've just spent $25 million in Brooklyn at our technology campus, one of several technology campuses. The market place itself, in order to be able to continue to serve those 85 million investors we'll have to divide the operating trading floor into two pieces.

But realize, I started the quest for a new facility in 1996, when average daily volume was about 350 million shares. Since that time, we've added a billion to that number -- we're averaging 1.4 billion shares a day. We need more space, true, but we need that contingency. God forbid we all die here, my partners will operate that second site, business as usual.

GIBBS: Before Sept. 11 there was some talk that the New York Stock Exchange was behind the curve, there was talk about consolidating the stock exchanges and may be even decentralizing going more toward electronic trading. Has 9/11 changed all of that?

GRASSO: Well to be very candid, this is my 35th year at the exchange. People have been saying "Dick, you're a dinosaur," for 36 of those 35 years. And it's an inspiration to all of us okay to change, evolve realize yes we've got an open out cry trading system but 90 percent of all orders which generate more than half of our daily activity are done on e-commerce platform which very simply described anywhere in the world here and back, four and a half seconds. So we are a blend of the cutting art of technology's best and the best of human interaction.

GIBBS: This part here, this ramp, this seems to be relatively new with all sorts of things is this a function of Sept. 11 as well?

GRASSO: No, actually it been in the making for the better part of five years. It is for us the equivalent of a control tower at an airport. On those six screens behind you Karen, I can know by just looking at the graphic what's happening at all 21 of our trading posts. Where the activity is, where I might have systemic demand that irregular or irrational. Where the hot, if you will, stock breakout for the day is. It's, for us, a heat map of the trading arena. This small little area allows us to look at literally $4 billion worth of technology infrastructure.

GIBBS: Is this somewhere, where, if a crisis, hopefully not of the magnitude of September 11 occurred that the powers that be the heads and you would get together and try a restore some sort of calm and confidence.

GRASSO: Well right from here is where I operated from on September 11. Right from that little work station right behind us. And it's got direct lines from the Secretary of the Treasury, to the president of the United States, the chairman of the Security and Exchange Commission it gives me all of the public access that I need. It's also got direct lines to the CEOs of the broker dealers, major leadership, major content of this market each day. So in this very small space you would sort of say this is like the bunker at the Pentagon.

GIBBS: This is it. So this is where you kind of build again this consensus, not just between your members and the specialists and the regulators and analysts, but also the CEOs and the shareholders. Those are a lot of different hats to wear.

GRASSO: That is why I have wonderfully talented partners, who do it far better than I.

GIBBS: There have been a lot of people trying to take pot shots at you in terms of your serving on the boards of Home Depot and Computer Associates. How do you respond to that in light of all the concerns about corporate governance and ethics?

GRASSO: Well, I think it's very important for me or for my partners or two co-presidents to eat our own cooking. To understand what it's like to be on the other side of the fence. But I'm also very sensitive to the realities of the critics. I've just stepped down; I've completed my term of service at CA. I just last year went on the board of Home Depot. I think it's important Karen to have a perspective of how well corporate governance is working in corporate American. And the only way you get that is being on the inside.

I would tell you that in terms of a conflict that people talk about, I completely immunize myself as do my partners. No policy decision related to the companies, now it's only one company's board whom I serve, ever comes to me. And the same would be true of my two co-presidents. The two boards they sit on must never or any policy issues related to those two much never come to those individuals. So we've created a firewall to separate any potential or if you will perception of conflict.

Is there a case to be made that we shouldn't sit on boards? I've heard the critics say that, but I must tell you in all candor my predecessor sat on three boards, his predecessor sat on four, and his predecessor sat on six while they were chairman and CEO of the New York Stock Exchange. I think that's too many.

From my own standpoint, having one board where I can really see -- call it the product of what's going on in the kitchen here in terms of corporate governance -- gives me a perspective that's valuable. And if ever there were to be the slightest hint of conflict, real, I would immediately upset myself from those boards as would my partners.

GIBBS: Where do you see this city, this exchange and this economy in the next five years?

GRASSO: This city, as the Holy Father himself last said when he visited New York, this is the capital of the world. Our former mayor was accused of giving it that label, but when the Pontiff was here, he said it himself.

GIBBS: What a blessing.

GRASSO: This is -- it was a blessing. And I think very appropriately so.

The world looks to New York and ever since 9/11 those people who at times thought New York was not too friendly a place, it has a certain callous attached to it. They flocked here from all over the United States from all over the world to show solidarity with New Yorkers. I think this city is as exciting today as ever in its history and its best days are in front of it. As to the U.S. Economy, is there a slowness in the second half that we didn't experience in the first, sure, but no one expected that level of GDP growth to continue. Because if you were to grow at 6 to 6+ percent, you're looking at the return of inflation and no one wants that. We're looking at the strongest economy on earth we're so privileged to be in this country.

You can only -- you can only believ, based on the visitors who come here from around the world, that this is what everyone wants, this economy, this market, okay? This culture, this capacity to rise, is like the Phoenix. From whatever the challenge, whether it was December of 1941 or September of 2001 or one predictable certainty is American rises and becomes stronger and we will again.

GIBBS: If you had one piece of advice to give our viewers tonight, what would it be?

GRASSO: As an American, as an investor, you’ve got to take a long view. This is not about day trading. This is about three years, five years, ten years out. History has proven -- and you take that horizontal approach and you invest in real companies with quality managements you will be very well reward. And it's not going to change going forward.

GIBBS: Dick Grasso, chairman of the New York Stock Exchange, thank you for a wonderful interview.

GRASSO: Thank you Karen, I'm honored to be with you.