Morgan Stanley’s Mack chooses a successor by Patricia Sellers @FortuneMagazine September 10, 2009, 9:52 PM EST E-mail Tweet Facebook Google Plus Linkedin Share icons Addendum: Morgan Stanley sources say that Wallid Chammah, widely viewed and ID’d below as a contender to be CEO of Morgan Stanley, took himself out of the race a year ago, after he and his family moved to London. James Gorman’s rivals for the top job, in fact, were outsiders. Spencer Stuart recruiter Tom Neff gave the board a list of names known to include usual suspects such as ex-Merrill Lynch chief John Thain, former Wachovia CEO Bob Steel, and BlackRock chief Larry Fink. John Mack is passing on the reins at Morgan Stanley . The new CEO will be James Gorman, who will take charge at year-end, the company announced this afternoon. An Aussie who spent much of his career at McKinsey and Merrill Lynch , Gorman, 51, is currently Morgan Stanley’s co-president, overseeing the asset management businesses, plus operations and technology. In what had shaped up to be a two-man succession race–at least as it came down to Morgan Stanley’s inside players–Gorman beat co-president Wallid Chammah, who is newly named chairman of Morgan Stanley International. For Mack, who will turn 65 in November, now is hardly the time to leave Wall Street triumphantly–by virtue of the simple fact that heroes hardly exist there anymore. Mack, a never-say-die chief executive, brought Morgan Stanley back from the brink a year ago, however, when he talked with both Citigroup CEO Vikram Pandit and Wachovia’s then-chief, Bob Steel, about survival by merging. “I’m not thinking about selling the firm,” Mack told me last September. “I’m thinking about investing in the firm in a big way.” With Morgan Stanley stock diving below $7 a share, Mack hung on for dear life, raised capital, and bought a big stake in Citi’s Smith Barney unit. Morgan Stanley has not made money this year–in July, it posted its third consecutive quarter of losses. And Mack’s risk-taking swagger has suffered lately as he’s avoided the kinds of bets that have paid off big for the other surviving Wall Street firm, Goldman Sachs . But Morgan Stanley has stabilized and the shares now sell for $28.64. Mack’s storied career proves that a high-powered executive can falter and come back. I chronicled his struggles in “The Trials of John Mack” in 2003. That story is about Mack’s painful departure from Morgan Stanley in 2001 (when he left the firm after 27 years, amidst disagreements with then-CEO Phil Purcell) and his bumpy run at Credit Suisse . Mack was later pushed out by the board there, and he returned, to Morgan Stanley in 2005. Little did he imagine the history-making run he’d endure this time. In a few months, after ceding the CEO role to Gorman, he’ll remain as chairman.