By Guy Faulconbridge
LONDON (Reuters) - Britain's opposition Labour leader Jeremy Corbyn warned Morgan Stanley that bankers are right to regard him as a threat because he wants to transform what he cast as a rigged economy that profits speculators at the expense of ordinary people.
Morgan Stanley cautioned investors on Nov. 26 that political uncertainty in Britain was a bigger threat than Brexit given the risk of Corbyn winning power and then dismantling what was once seen as one of the world's most stable free-market economies.
"Bankers like Morgan Stanley should not run our country but they think they do," Corbyn, a 68-year-old socialist, said in a video posted on Twitter that showed the towers of the City of London and Canary Wharf financial districts.
"So when they say we're a threat, they're right: We're a threat to a damaging and failed system that is rigged for the few," he said.
Morgan Stanley declined to comment.
London, which vies with New York for the title of the world's financial capital, dominates the $5.1-trillion-a-day global foreign exchange market and is home to more banks than any other financial centre.
But many bankers, CEOs and investors were spooked by the shock 2016 vote for Brexit and have been dismayed by the political turmoil which followed, including Prime Minister Theresa May's botched gamble on a snap election in June.
May lost her party its majority in parliament in that election while Corbyn's unexpectedly strong result in the vote has convinced many of Labour's opponents that Corbyn is a potential prime minister if May's government falls.
"CUBA WITHOUT THE SUN"
Kept in power with the support of a small Northern Irish political party, May has just over a year to negotiate Britain's divorce from the EU that will shape Britain's prosperity and global influence for generations to come.
Now many investors fear Corbyn, who was once dismissed by his own party as an out-of-touch peace campaigner with no hope of ever winning power, could win the top job if the political turmoil continues in London.
One senior executive at a top U.S. investment bank said that at a meeting in New York recently concerns over Corbyn trumped concerns about Brexit.
"Their top concern was not what's happening in Germany and Spain, or North Korea and Trump: their main concern was what's happening in the UK and what Corbyn might mean for the country," the executive, who spoke on condition of anonymity said.
"It's like Cuba without the sun," the executive said.
Morgan Stanley said Britain now faced a "double whammy" of uncertainty from Brexit and the domestic political instability.
"From a UK investor perspective, we believe that the domestic political situation is at least as significant as Brexit," Morgan Stanley analysts said in a note to clients.
Morgan Stanley said there was a high likelihood of another national election in late 2018 -- just months before Britain is due to leave the EU on March 29 2019.
The bank's analysts said a Labour victory could mark the biggest shift in British politics since the late 1970s when Margaret Thatcher won victory, started to privatise chunks of the economy and opened up London to U.S. and Japanese banks.
"It is certainly plausible that the Labour Party could ultimately moderate some of its more radical policy ideas; the alternative could be the most significant political shift in the UK since the end of the 1970s," Morgan Stanley said.
"SPECULATORS AND GAMBLERS"
Corbyn has cast bankers as the villains behind the 2008 financial crisis and has promised to increase taxes on the banks and investment funds which trade out of London, including their staff through higher income taxes.
Corbyn, who has promised sweeping renationalisation, higher public spending and tax rises for the rich, said banks like Morgan Stanley were speculators who had left ordinary people to pay the price for their greed.
"These are the same speculators and gamblers who crashed our economy in 2008 and then we had to bail them out," Corbyn said. "Their greed plunged the world into crisis and we're still paying the price."
Corbyn said Morgan Stanley CEO James Gorman earned tens of millions personally and banks paid out billions of pounds worth of bonuses while Labour was the party of the people and a government in waiting.
Such "banker bashing" could be popular with some voters in Britain where financiers are often portrayed as vastly overpaid. Financial services contributed 11.5 percent of total UK government tax receipts in 2016.
Corbyn's Labour won 40 percent of the votes cast in June 2017 while May's Conservatives won 42 percent.
Morgan Stanley, which opened on Wall Street in 1935, set up its European headquarters in London in 1977 and it now has over 5,000 staff, most at a block in Canary Wharf. Morgan Stanley did not receive a British government bailout during the 2008 crisis.
(Additional reporting by Anjuli Davies in London and Stephen Jewkes in Milan; Editing by William Maclean and Angus MacSwan)
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