A view of the offices of the financial trading company Morgan Stanley in New York.
Photo: justin lane/ShutterstockIt’s been 11 years since the financial panic, yet liberals are still howling about Wall Street getting richer as folks on Main Street scrape by. Hmmm, then why would Morgan Stanley —one of Wall Street’s leading investment banks—be buying the online brokerage firm E-Trade for its Main Street customers?
Morgan Stanley has focused in recent years on asset management for wealthy clients. Yet on Thursday it announced a $13 billion bid for E-Trade, which would be the biggest bank takeover since the 2008 panic and recession. Many Americans probably are familiar with E-Trade’s talking baby commercials, but with 5.2 million customer accounts and $360 billion in retail assets, it ranks as a large wealth manager for America’s non-affluent.
Discount brokerage firms have been fighting a price war, which has made trading essentially free but has prompted cost cutting and consolidation across the industry. In November Charles Schwab and TD Ameritrade agreed to a $26 billion merger. Meantime, investment banks are eyeing non-affluent customers as a source of growth amid sluggish trading and deal-making revenues.
J.P. Morgan customers get unlimited free stock trades. Goldman Sachs offers no-fee savings accounts that pay 1.7% in interest on deposits—40 times more than other large banks. Like its competitors, Morgan Stanley is now trying to increase retail deposits that are a cheap source of funding for lending. They also hope to bring in non-millionaire customers whom they hope to someday sell more services.
In other words, Wall Street banks are all making long bets on the middle-class becoming richer. Democrats prefer to focus on inequality and wealth redistribution, but middle-class wealth is increasing. Millionaires and billionaires aren’t the only ones benefiting from larger corporate dividends and stock buybacks.
Corporate equities and mutual-fund shares held by Americans in the 50% to 90% range in the country’s wealth-distribution curve have more than doubled since 2010, according to the Federal Reserve. Ditto for the bottom 50%. The top 1% have also grown richer, not least because they already have more financial assets. But the crucial point for social cohesion and democratic governance is whether all Americans have the opportunity to share the benefits of economic growth.
Morgan Stanley’s E-Trade acquisition would also diversify its funding base and could make its balance sheet sturdier during a downturn. But the merger’s success will hinge on a prosperous American middle class.
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February 22, 2020 at 06:48AM
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Morgan Stanley's Middle-Class Bet - The Wall Street Journal
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