Morgan Stanley's Cruz to Leave After Trading Losses

Morgan Stanley Co-President Zoe Cruz, the highest-paid female executive on Wall Street, will end her 25-year career at the firm three weeks after it disclosed $3.7 billion of losses on mortgage-related securities.

Morgan Stanley, the second-biggest U.S. securities firm by market value, named Walid Chammah, 53, and James Gorman, 49, to replace Cruz and Robert Scully as co-presidents, the New York- based company said today in a statement. Scully, 57, will join a newly created office of the chairman.

Cruz, 52, who oversaw trading, was viewed by analysts as a leading candidate to succeed Chief Executive Officer John Mack. Her departure adds to the list of banking executives who have stepped down amid a wave of credit losses tied to subprime home loans. Warren Spector, the former co-president of Bear Stearns Cos., was forced out in August, followed by Merrill Lynch & Co. CEO Stan O'Neal and Citigroup Inc. chief Charles Prince.

In this environment, if things happen on your watch, then the door is where you are pointed, said Ken Crawford, a portfolio manager at Argent Capital Management in St. Louis, which has about $950 million of assets, including Morgan Stanley shares. At investment banks of late, it's hard to say that big heads have not rolled.

Morgan Stanley shares have tumbled 23 percent this year, the steepest annual decline since 2002. While the stock lags behind the 13 percent gain by Goldman Sachs Group Inc., the biggest U.S. securities firm, it has outperformed the 38 percent drop at Merrill Lynch and the 39 percent slump at Bear Stearns.