Shearson
Encyclopedia
Shearson was the name of a series of investment banking
and retail brokerage firms from 1902 until 1994, named for Edward Shearson
and the firm he founded, Shearson Hammill & Co. Among Shearson's most notable incarnations were Shearson / American Express, Shearson Lehman / American Express, Shearson Lehman Brothers, Shearson Lehman Hutton and finally Smith Barney Shearson.
For its first eight decades, the firm operated independently and merged with a number of Wall Street
's most venerable securities firms including Hayden Stone & Co. and Loeb Rhoades & Co.. In 1981, Shearson was acquired by American Express
and operated as a subsidiary of the financial services company before being merged with Lehman Brothers Kuhn Loeb in 1984 and E.F. Hutton & Co. in 1988.
In 1993, Shearson was sold to Primerica, the predecessor of Citigroup
, and merged with its retail brokerage business, Smith Barney
to create Smith Barney Shearson. The Shearson name was discontinued in 1994.
firms over a 25 year period beginning in the early 1960s that included Lehman Brothers
, Kuhn Loeb, E.F. Hutton, Hayden Stone & Co., Shearson, Hammill & Co.
, Loeb, Rhoades & Co.
, Hornblower & Company and Cogan, Berlind, Weill & Levitt
, which ultimately came together under the ownership of American Express
.
a Wall Street
brokerage and investment banking firm founded in 1902 by Edward Shearson
and Caleb Wild Hammill
. The firm originally built its business as a stock broker
as well as a broker of various commodities, particularly grain and cotton. The firm was a member of the New York Stock Exchange
, the Chicago Stock Exchange
and the Chicago Mercantile Exchange
.
Before forming the firm, Shearson had served as comptroller of U.S. Steel
and of Federal Steel Company before that. Shearson, who was raised in Ontario, Canada began his career as an auditor for the Wisconsin Central Railroad before taking a position in the steel industry in 1898. Shearson was an active member of New York society. Hammill, who was raised in Albion, Michigan
, moved first to Chigao and subsequently to New York in 1890.
The firm was originally headquartered in the Empire Building
at 71 Broadway in New York City
and maintained another main office in Chicago. By the end of World War I, Shearson Hammill had six branch offices and seven correspondents.
In the 1960s Shearson, Hammill became well known for its commercials that suggested "If You Want To Know What’s Going On On Wall Street, Ask Shearson Hammill." The firm had 63 offices in the US and internationally supported by a well-regarded securities research department.
, the chairman of the up-and-coming Cogan, Berlind, Weill & Levitt
, had been acquiring many of Wall Streets oldest and most venerable investment banking and brokerage firms. By 1973, Weill's firm was known as Hayden Stone, Inc. following CBWL's acquisition of Hayden, Stone & Co.
Despite its strong retail brokerage business, Shearson's capital reserves were diminished and by 1974, it was clear that Shearson did not have sufficient capital to survive as an independent firm, opting to merge with Weill's better capitalized Hayden Stone, Inc.. The combined firm was renamed Shearson Hayden Stone, as Weill retained the Shearson brand, which was widely recognized as a major underwriter and brokerage.
's Shearson Loeb Rhoades, the second largest securities firm in the United States to form Shearson/American Express. Shearson Loeb Rhoades, itself was the culmination of several mergers in the 1970s as Weill's Hayden Stone, Inc. merged with Shearson, Hammill & Co.
in 1974 to form Shearson Hayden Stone. Shearson Hayden Stone then merged with Loeb, Rhoades, Hornblower & Co. (formerly Loeb, Rhoades & Co.
and Hornblower & Weeks
) to form Shearson Loeb Rhoades in 1979. With capital totalling $250 million at the time of its acquisition, Shearson Loeb Rhoades trailed only Merrill Lynch
as the securities brokerage
industry's largest firm. After its acquisition by American Express, the firm was renamed Shearson/American Express.
After selling Shearson to American Express, Weill was given the position of president of American Express in 1983. The following year, Weill was named chairman and CEO of American Express's insurance subsidiary, Fireman's Fund Insurance Company
. Weill grew increasingly unhappy with responsibilities within American Express and his conflicts with American Express' CEO James D. Robinson III
. Weill soon realized that he was not positioned to be named CEO and after the firm's merger with Lehman Brothers Kuhn Loeb, Weill chose to resign from American Express in August 1985. Weill would return to building a large financial services company of his own, which would become Citigroup
and would go on to acquire the core Shearson brokerage business that he had built in the 1960s and 1970s.
and trading firm, Lehman Brothers Kuhn Loeb
, and added it to the Shearson family, creating Shearson Lehman/American Express.
Lehman Brothers Kuhn Loeb, which itself was the merger of Lehman Brothers
and Kuhn Loeb in 1977 was led by Pete Peterson, a former United States Secretary of Commerce
and future founder of the Blackstone Group
. However, by the early 1980s, hostilities between the firm's investment bankers and traders
, who were driving most of the firm's profits, prompted Peterson to promote Lewis Glucksman
, the firm's President, COO and former trader, to be his co-CEO in May 1983. Glucksman introduced a number of changes that had the effect of increasing tensions. Coupled with Glucksman’s management style and a downturn in the markets, these tensions resulted in a power struggle that ousted Peterson and left Glucksman as the sole CEO. Upset bankers who had soured over the power struggle left the company. The company suffered under the disintegration, and Glucksman was pressured into selling the firm. After the merger, Peter A. Cohen
was named Chairman and CEO of Shearson Lehman,
During this period, Shearson Lehman was aggressive in building its leveraged finance business in the model of rival Drexel Burnham Lambert
. In 1989, Shearson backed F. Ross Johnson
's management team in its attempted management buyout
of RJR Nabisco
but were ultimately outbid by private equity firm Kohlberg Kravis Roberts, who were backed by Drexel.
In 1984 Shearson/American Express purchased the 90-year old Investors Diversified Services, bringing with it a fleet of financial advisors and investment products.
and his brother Franklyn Laws Hutton. Under the Hutton brothers and later Robert M. Fomon
and the well-known Wall Street trader Gerald M. Loeb
, E.F. Hutton became one of the largest brokerage firms in the U.S. Hutton was best known for its commercials in the 1970s and 1980s that used the phrase, "When E. F. Hutton talks, people listen."
In the 1980s Hutton was caught up in in a number of difficulties that ultimately led the firm to seek a buyer. Hutton's most serious trouble came from a check kiting
scandal that was uncovered in 1985. Hutton branches were writing checks against accounts at various regional banks and then funding those accounts with checks from yet other banks. This strategy, known as "chaining," gave Hutton the use of money in both accounts until the checks cleared. In effect, Hutton was giving itself a free loan that also did not carry any interest. Then, in early 1987, an internal Hutton probe revealed that brokers at an office in Providence, Rhode Island
, laundered money
for the Patriarca crime family
. Although Hutton reported the investigation to the SEC, it was not enough to stop prosecutors from all but announcing that Hutton would be indicted. This last scandal was uncovered only a week before the 1987 stock market crash
. By the end of November 1987, Hutton had lost $76 million, largely due to massive trading losses and margin calls that its customers could not meet.
On December 3, 1987, Hutton agreed to a merger with Shearson Lehman in a $1 billion ($ today) deal. The merger took effect in 1988, and the merged firm was named Shearson Lehman Hutton, Inc.
Following the merger, dozens of Hutton brokers left the firm to join competitors. At the same time, the combined firm suffered dwindling business from individual investors as its focus was shifted to large corporate transactions. The Hutton brand was used until 1990, when American Express abandoned the name and the business was renamed Shearson Lehman Brothers. Joe Plumeri became the President & Managing Partner of Shearson Lehman Brothers in 1990.
In 1992, Shearson sold the Boston Company, an asset management group, to Mellon Financial
. In December 1988, the Boston Company, had disclosed that it had overreported its earnings by $30 million.
became CEO of American Express in 1993, he negotiated the sale of Shearson's retail brokerage and asset management
business to Primerica. Primerica's Sanford I. Weill
had been the architect of the what had become Shearson/American Express in the 1960s and 1970s building up his small firm Cogan, Berlind, Weill & Levitt
into one of the largest brokerage firms in the US. The Shearson business was merged with Primerica's Smith Barney
to create Smith Barney Shearson. Ultimately, the Shearson name was dropped in 1994.
In 1994, American Express spun off of the remaining investment banking and institutional businesses as Lehman Brothers Holdings Inc
which after almost fifteen years of independence would file for bankruptcy protection in 2008
.
Investment banking
An investment bank is a financial institution that assists individuals, corporations and governments in raising capital by underwriting and/or acting as the client's agent in the issuance of securities...
and retail brokerage firms from 1902 until 1994, named for Edward Shearson
Edward Shearson
Edward Shearson was a banker, millionaire and founder of Shearson, Hammill & Co., which was among the largest brokerage and investment banking firms in the United States....
and the firm he founded, Shearson Hammill & Co. Among Shearson's most notable incarnations were Shearson / American Express, Shearson Lehman / American Express, Shearson Lehman Brothers, Shearson Lehman Hutton and finally Smith Barney Shearson.
For its first eight decades, the firm operated independently and merged with a number of Wall Street
Wall Street
Wall Street refers to the financial district of New York City, named after and centered on the eight-block-long street running from Broadway to South Street on the East River in Lower Manhattan. Over time, the term has become a metonym for the financial markets of the United States as a whole, or...
's most venerable securities firms including Hayden Stone & Co. and Loeb Rhoades & Co.. In 1981, Shearson was acquired by American Express
American Express
American Express Company or AmEx, is an American multinational financial services corporation headquartered in Three World Financial Center, Manhattan, New York City, New York, United States. Founded in 1850, it is one of the 30 components of the Dow Jones Industrial Average. The company is best...
and operated as a subsidiary of the financial services company before being merged with Lehman Brothers Kuhn Loeb in 1984 and E.F. Hutton & Co. in 1988.
In 1993, Shearson was sold to Primerica, the predecessor of Citigroup
Citigroup
Citigroup Inc. or Citi is an American multinational financial services corporation headquartered in Manhattan, New York City, New York, United States. Citigroup was formed from one of the world's largest mergers in history by combining the banking giant Citicorp and financial conglomerate...
, and merged with its retail brokerage business, Smith Barney
Smith Barney
Morgan Stanley Smith Barney is a retail brokerage joint venture between Morgan Stanley and Citigroup.On January 13, 2009, Morgan Stanley and Citigroup announced that Citigroup would sell 51% of Smith Barney to Morgan Stanley, creating Morgan Stanley Smith Barney, which was formerly a division of...
to create Smith Barney Shearson. The Shearson name was discontinued in 1994.
History
Shearson Lehman Hutton was the result of the combination of a number of venerable Wall StreetWall Street
Wall Street refers to the financial district of New York City, named after and centered on the eight-block-long street running from Broadway to South Street on the East River in Lower Manhattan. Over time, the term has become a metonym for the financial markets of the United States as a whole, or...
firms over a 25 year period beginning in the early 1960s that included Lehman Brothers
Lehman Brothers
Lehman Brothers Holdings Inc. was a global financial services firm. Before declaring bankruptcy in 2008, Lehman was the fourth largest investment bank in the USA , doing business in investment banking, equity and fixed-income sales and trading Lehman Brothers Holdings Inc. (former NYSE ticker...
, Kuhn Loeb, E.F. Hutton, Hayden Stone & Co., Shearson, Hammill & Co.
Shearson, Hammill & Co.
Shearson, Hammill & Co. was a Wall Street brokerage and investment banking firm founded in 1902 by Edward Shearson and Caleb Wild Hammill. The firm originally built its business as a stock broker as well as a broker of various commodities, particularly grain and cotton...
, Loeb, Rhoades & Co.
Loeb, Rhoades & Co.
Loeb, Rhoades & Co. was a Wall Street brokerage firm founded in 1931 and acquired in 1979 by Sanford I. Weill's Shearson Hayden Stone. Although the firm would operate as Shearson Loeb Rhoades for two years, the firm would ultimately be acquired in 1981 by American Express to form Shearson/American...
, Hornblower & Company and Cogan, Berlind, Weill & Levitt
Cogan, Berlind, Weill & Levitt
Cogan, Berlind, Weill & Levitt, originally Carter, Berlind, Potoma & Weill, was an American investment banking and brokerage firm founded in 1960 and acquired by American Express in 1981. In its two decades as an independent firm, Cogan, Berlind, Weill & Levitt served as a vehicle for the rollup...
, which ultimately came together under the ownership of American Express
American Express
American Express Company or AmEx, is an American multinational financial services corporation headquartered in Three World Financial Center, Manhattan, New York City, New York, United States. Founded in 1850, it is one of the 30 components of the Dow Jones Industrial Average. The company is best...
.
Shearson Hammill & Co. (1902–1974)
The Shearson name traces its origins to the formation of Shearson, Hammill & Co.Shearson, Hammill & Co.
Shearson, Hammill & Co. was a Wall Street brokerage and investment banking firm founded in 1902 by Edward Shearson and Caleb Wild Hammill. The firm originally built its business as a stock broker as well as a broker of various commodities, particularly grain and cotton...
a Wall Street
Wall Street
Wall Street refers to the financial district of New York City, named after and centered on the eight-block-long street running from Broadway to South Street on the East River in Lower Manhattan. Over time, the term has become a metonym for the financial markets of the United States as a whole, or...
brokerage and investment banking firm founded in 1902 by Edward Shearson
Edward Shearson
Edward Shearson was a banker, millionaire and founder of Shearson, Hammill & Co., which was among the largest brokerage and investment banking firms in the United States....
and Caleb Wild Hammill
Caleb Wild Hammill
Caleb Wild Hammill was one of the founders of the stockbrokerage and banking investment firm of Shearson, Hammill & Co., founded in 1902 by Mr. Hammill & Edward Shearson. It was in existence from 1902 to 1974 under that original name....
. The firm originally built its business as a stock broker
Broker
A broker is a party that arranges transactions between a buyer and a seller, and gets a commission when the deal is executed. A broker who also acts as a seller or as a buyer becomes a principal party to the deal...
as well as a broker of various commodities, particularly grain and cotton. The firm was a member of the New York Stock Exchange
New York Stock Exchange
The New York Stock Exchange is a stock exchange located at 11 Wall Street in Lower Manhattan, New York City, USA. It is by far the world's largest stock exchange by market capitalization of its listed companies at 13.39 trillion as of Dec 2010...
, the Chicago Stock Exchange
Chicago Stock Exchange
The Chicago Stock Exchange is a stock exchange in Chicago, Illinois, USA. The exchange is a national securities exchange and self-regulated organization, which operates under the oversight of the U.S. Securities and Exchange Commission . The Chicago Stock Exchange is the third most active stock...
and the Chicago Mercantile Exchange
Chicago Mercantile Exchange
The Chicago Mercantile Exchange is an American financial and commodity derivative exchange based in Chicago. The CME was founded in 1898 as the Chicago Butter and Egg Board. Originally, the exchange was a non-profit organization...
.
Before forming the firm, Shearson had served as comptroller of U.S. Steel
U.S. Steel
The United States Steel Corporation , more commonly known as U.S. Steel, is an integrated steel producer with major production operations in the United States, Canada, and Central Europe. The company is the world's tenth largest steel producer ranked by sales...
and of Federal Steel Company before that. Shearson, who was raised in Ontario, Canada began his career as an auditor for the Wisconsin Central Railroad before taking a position in the steel industry in 1898. Shearson was an active member of New York society. Hammill, who was raised in Albion, Michigan
Albion, Michigan
Albion is a city in Calhoun County in the south central region of the Lower Peninsula of the US state of Michigan. The population was 9,144 at the 2000 census and is part of the Battle Creek Metropolitan Statistical Area...
, moved first to Chigao and subsequently to New York in 1890.
The firm was originally headquartered in the Empire Building
Empire Building
The Empire Building at 71 Broadway, Manhattan, New York City is a 21 story steel framed curtain-wall skyscraper designed by Kimball & Thompson and built by Marc Eidlitz & Son in 1895. It is one of the earliest skyscrapers built on pneumatic caissons and one of the oldest still standing today. It...
at 71 Broadway in New York City
New York City
New York is the most populous city in the United States and the center of the New York Metropolitan Area, one of the most populous metropolitan areas in the world. New York exerts a significant impact upon global commerce, finance, media, art, fashion, research, technology, education, and...
and maintained another main office in Chicago. By the end of World War I, Shearson Hammill had six branch offices and seven correspondents.
In the 1960s Shearson, Hammill became well known for its commercials that suggested "If You Want To Know What’s Going On On Wall Street, Ask Shearson Hammill." The firm had 63 offices in the US and internationally supported by a well-regarded securities research department.
Shearson Hayden Stone (1974–1979)
In the early 1970s, Shearson faced financial difficulties as did many of the venerable Wall Street firms in the midst of the 1973–1974 stock market crash. In response to the crisis, Shearson laid off a large portion of its staff in 1973. Meanwhile, through the 1960s and 1970s, Sanford I. WeillSanford I. Weill
Sanford I. "Sandy" Weill is an American banker, financier and philanthropist. He is a former chief executive officer and chairman of Citigroup. He served in those positions until October 1, 2003, and April 18, 2006, respectively....
, the chairman of the up-and-coming Cogan, Berlind, Weill & Levitt
Cogan, Berlind, Weill & Levitt
Cogan, Berlind, Weill & Levitt, originally Carter, Berlind, Potoma & Weill, was an American investment banking and brokerage firm founded in 1960 and acquired by American Express in 1981. In its two decades as an independent firm, Cogan, Berlind, Weill & Levitt served as a vehicle for the rollup...
, had been acquiring many of Wall Streets oldest and most venerable investment banking and brokerage firms. By 1973, Weill's firm was known as Hayden Stone, Inc. following CBWL's acquisition of Hayden, Stone & Co.
Hayden, Stone & Co.
Hayden, Stone & Co. was a major securities firm founded in 1892 by Charles Hayden and Galen L. Stone. The firm was acquired by Cogan, Berlind, Weill & Levitt in 1972 and was part of what ultimately would become Shearson/American Express in 1981.-History:...
Despite its strong retail brokerage business, Shearson's capital reserves were diminished and by 1974, it was clear that Shearson did not have sufficient capital to survive as an independent firm, opting to merge with Weill's better capitalized Hayden Stone, Inc.. The combined firm was renamed Shearson Hayden Stone, as Weill retained the Shearson brand, which was widely recognized as a major underwriter and brokerage.
Shearson Loeb Rhoades (1979–1981)
Weill's next major target in 1979 was another prominent investment bank, Loeb, Rhoades, Hornblower & Co., which like Shearson had been suffering financial difficulties and was looking for a potential acquiror. During Mothers Day Weekend 1979, Shearson and Loeb agreed to an $83 million ($ million today) all-stock merger to form Shearson Loeb Rhoades, with Weill assuming the position of CEO of the combined firm. At the time of the merger, Shearson Loeb Rhoades, with $260 million of combined assets and approximately $550 million of revenue, was among the largest investment banking houses. By most measures, Shearson became the second largest brokerage firm in the U.S. trailing only Merrill Lynch. The merger with Loeb Rhoades was more notable for introducing a stronger investment banking business to Shearson.Shearson/American Express
During the 1980s, American Express embarked on an effort to become a financial services supercompany. In mid-1981 it purchased Sanford I. WeillSanford I. Weill
Sanford I. "Sandy" Weill is an American banker, financier and philanthropist. He is a former chief executive officer and chairman of Citigroup. He served in those positions until October 1, 2003, and April 18, 2006, respectively....
's Shearson Loeb Rhoades, the second largest securities firm in the United States to form Shearson/American Express. Shearson Loeb Rhoades, itself was the culmination of several mergers in the 1970s as Weill's Hayden Stone, Inc. merged with Shearson, Hammill & Co.
Shearson, Hammill & Co.
Shearson, Hammill & Co. was a Wall Street brokerage and investment banking firm founded in 1902 by Edward Shearson and Caleb Wild Hammill. The firm originally built its business as a stock broker as well as a broker of various commodities, particularly grain and cotton...
in 1974 to form Shearson Hayden Stone. Shearson Hayden Stone then merged with Loeb, Rhoades, Hornblower & Co. (formerly Loeb, Rhoades & Co.
Loeb, Rhoades & Co.
Loeb, Rhoades & Co. was a Wall Street brokerage firm founded in 1931 and acquired in 1979 by Sanford I. Weill's Shearson Hayden Stone. Although the firm would operate as Shearson Loeb Rhoades for two years, the firm would ultimately be acquired in 1981 by American Express to form Shearson/American...
and Hornblower & Weeks
Hornblower & Weeks
Hornblower & Weeks was an investment banking and brokerage firm founded by Henry Hornblower and John W. Weeks in 1888. At its peak in the late 1970s, Hornblower ranked eighth among member firms of the New York Stock Exchange in number of retail offices, with 93 retail sales offices located in the...
) to form Shearson Loeb Rhoades in 1979. With capital totalling $250 million at the time of its acquisition, Shearson Loeb Rhoades trailed only Merrill Lynch
Merrill Lynch
Merrill Lynch is the wealth management division of Bank of America. With over 15,000 financial advisors and $2.2 trillion in client assets it is the world's largest brokerage. Formerly known as Merrill Lynch & Co., Inc., prior to 2009 the firm was publicly owned and traded on the New York...
as the securities brokerage
Stock broker
A stock broker or stockbroker is a regulated professional broker who buys and sells shares and other securities through market makers or Agency Only Firms on behalf of investors...
industry's largest firm. After its acquisition by American Express, the firm was renamed Shearson/American Express.
After selling Shearson to American Express, Weill was given the position of president of American Express in 1983. The following year, Weill was named chairman and CEO of American Express's insurance subsidiary, Fireman's Fund Insurance Company
Fireman's Fund Insurance Company
Fireman's Fund Insurance Company, based in Novato, Calif., provides personal and commercial property and casualty insurance products in the United States....
. Weill grew increasingly unhappy with responsibilities within American Express and his conflicts with American Express' CEO James D. Robinson III
James D. Robinson III
James Dixon Robinson III was the chief executive officer of American Express Co. from 1977 until his retirement in 1993.-Education:...
. Weill soon realized that he was not positioned to be named CEO and after the firm's merger with Lehman Brothers Kuhn Loeb, Weill chose to resign from American Express in August 1985. Weill would return to building a large financial services company of his own, which would become Citigroup
Citigroup
Citigroup Inc. or Citi is an American multinational financial services corporation headquartered in Manhattan, New York City, New York, United States. Citigroup was formed from one of the world's largest mergers in history by combining the banking giant Citicorp and financial conglomerate...
and would go on to acquire the core Shearson brokerage business that he had built in the 1960s and 1970s.
Shearson Lehman Brothers
In 1984, American Express acquired the investment bankingInvestment banking
An investment bank is a financial institution that assists individuals, corporations and governments in raising capital by underwriting and/or acting as the client's agent in the issuance of securities...
and trading firm, Lehman Brothers Kuhn Loeb
Lehman Brothers
Lehman Brothers Holdings Inc. was a global financial services firm. Before declaring bankruptcy in 2008, Lehman was the fourth largest investment bank in the USA , doing business in investment banking, equity and fixed-income sales and trading Lehman Brothers Holdings Inc. (former NYSE ticker...
, and added it to the Shearson family, creating Shearson Lehman/American Express.
Lehman Brothers Kuhn Loeb, which itself was the merger of Lehman Brothers
Lehman Brothers
Lehman Brothers Holdings Inc. was a global financial services firm. Before declaring bankruptcy in 2008, Lehman was the fourth largest investment bank in the USA , doing business in investment banking, equity and fixed-income sales and trading Lehman Brothers Holdings Inc. (former NYSE ticker...
and Kuhn Loeb in 1977 was led by Pete Peterson, a former United States Secretary of Commerce
United States Secretary of Commerce
The United States Secretary of Commerce is the head of the United States Department of Commerce concerned with business and industry; the Department states its mission to be "to foster, promote, and develop the foreign and domestic commerce"...
and future founder of the Blackstone Group
Blackstone Group
The Blackstone Group L.P. is an American-based alternative asset management and financial services company that specializes in private equity, real estate, and credit and marketable alternative investment strategies, as well as financial advisory services, such as mergers and acquisitions ,...
. However, by the early 1980s, hostilities between the firm's investment bankers and traders
Trader (finance)
A trader is someone in finance who buys and sells financial instruments such as stocks, bonds, commodities and derivatives. A broker who simply fills buy or sell orders is not a trader, as they are merely executing instructions given to them. According to the Wall Street Journal in 2004, a managing...
, who were driving most of the firm's profits, prompted Peterson to promote Lewis Glucksman
Lewis Glucksman
Lewis L. Glucksman was a former Lehman Brothers trader and former chief executive officer and chairman of Lehman Brothers, Kuhn, Loeb Inc.-Life:...
, the firm's President, COO and former trader, to be his co-CEO in May 1983. Glucksman introduced a number of changes that had the effect of increasing tensions. Coupled with Glucksman’s management style and a downturn in the markets, these tensions resulted in a power struggle that ousted Peterson and left Glucksman as the sole CEO. Upset bankers who had soured over the power struggle left the company. The company suffered under the disintegration, and Glucksman was pressured into selling the firm. After the merger, Peter A. Cohen
Peter A. Cohen
Peter A. Cohen was the former Chairman and Chief Executive Officer of Shearson Lehman Brothers, later known as Shearson Lehman Hutton from 1983 through 1990. Today, Cohen serves as Chairman and CEO of Cowen Group, formerly known as Cowen & Company.-Career:...
was named Chairman and CEO of Shearson Lehman,
During this period, Shearson Lehman was aggressive in building its leveraged finance business in the model of rival Drexel Burnham Lambert
Drexel Burnham Lambert
Drexel Burnham Lambert was a major Wall Street investment banking firm, which first rose to prominence and then was forced into bankruptcy in February 1990 by its involvement in illegal activities in the junk bond market, driven by Drexel employee Michael Milken. At its height, it was the...
. In 1989, Shearson backed F. Ross Johnson
F. Ross Johnson
-Biography:Born in Winnipeg, Manitoba, into a lower-middle-class family, he used a military cadet scholarship program to attend the University of Manitoba where he graduated in 1952 with a Bachelor of Commerce degree and was a member of the fraternity Phi Delta Theta. He went on to earn an M.B.A....
's management team in its attempted management buyout
Management buyout
A management buyout is a form of acquisition where a company's existing managers acquire a large part or all of the company.- Overview :Management buyouts are similar in all major legal aspects to any other acquisition of a company...
of RJR Nabisco
RJR Nabisco
RJR Nabisco, Inc., was an American conglomerate formed in 1985 by the merger of Nabisco Brands and R.J. Reynolds Tobacco Company. RJR Nabisco was purchased in 1988 by Kohlberg Kravis Roberts & Co...
but were ultimately outbid by private equity firm Kohlberg Kravis Roberts, who were backed by Drexel.
In 1984 Shearson/American Express purchased the 90-year old Investors Diversified Services, bringing with it a fleet of financial advisors and investment products.
Shearson Lehman Hutton
In 1988, Shearson Lehman acquired E.F. Hutton & Co., a brokerage firm founded in 1904 by Edward Francis HuttonEdward Francis Hutton
Edward Francis Hutton was an American financier and co-founder of E. F. Hutton & Co....
and his brother Franklyn Laws Hutton. Under the Hutton brothers and later Robert M. Fomon
Robert M. Fomon
Robert Michael Fomon was an American financier who was Chairman and Chief Executive Officer of E. F. Hutton & Co. from 1970 to 1987, a governor of the New York Stock Exchange, and Chairman of the Board of Governors of the Pacific Stock Exchange...
and the well-known Wall Street trader Gerald M. Loeb
Gerald M. Loeb
Gerald Loeb was a founding partner of E.F. Hutton & Co., a renowned Wall Street trader, and the author of the books The Battle For Investment Survival and The Battle For Stock Market Profits. Loeb promoted a view of the market as too risky to hold stocks for the long term in contrast to well...
, E.F. Hutton became one of the largest brokerage firms in the U.S. Hutton was best known for its commercials in the 1970s and 1980s that used the phrase, "When E. F. Hutton talks, people listen."
In the 1980s Hutton was caught up in in a number of difficulties that ultimately led the firm to seek a buyer. Hutton's most serious trouble came from a check kiting
Check kiting
Cheque fraud/check fraud refers to a category of criminal acts that involve making the unlawful use of cheques in order to illegally acquire or borrow funds that do not exist within the account balance or account-holder's legal ownership...
scandal that was uncovered in 1985. Hutton branches were writing checks against accounts at various regional banks and then funding those accounts with checks from yet other banks. This strategy, known as "chaining," gave Hutton the use of money in both accounts until the checks cleared. In effect, Hutton was giving itself a free loan that also did not carry any interest. Then, in early 1987, an internal Hutton probe revealed that brokers at an office in Providence, Rhode Island
Providence, Rhode Island
Providence is the capital and most populous city of Rhode Island and was one of the first cities established in the United States. Located in Providence County, it is the third largest city in the New England region...
, laundered money
Money laundering
Money laundering is the process of disguising illegal sources of money so that it looks like it came from legal sources. The methods by which money may be laundered are varied and can range in sophistication. Many regulatory and governmental authorities quote estimates each year for the amount...
for the Patriarca crime family
Patriarca crime family
The Patriarca crime family, also known as the New England crime family and the Providence crime family, is an Italian-American organized crime syndicate based in New England, specifically Providence, Rhode Island and Boston, Massachusetts, and is part of the Italian-American Mafia or "La Cosa Nostra"...
. Although Hutton reported the investigation to the SEC, it was not enough to stop prosecutors from all but announcing that Hutton would be indicted. This last scandal was uncovered only a week before the 1987 stock market crash
Black Monday (1987)
In finance, Black Monday refers to Monday October 19, 1987, when stock markets around the world crashed, shedding a huge value in a very short time. The crash began in Hong Kong and spread west to Europe, hitting the United States after other markets had already declined by a significant margin...
. By the end of November 1987, Hutton had lost $76 million, largely due to massive trading losses and margin calls that its customers could not meet.
On December 3, 1987, Hutton agreed to a merger with Shearson Lehman in a $1 billion ($ today) deal. The merger took effect in 1988, and the merged firm was named Shearson Lehman Hutton, Inc.
Following the merger, dozens of Hutton brokers left the firm to join competitors. At the same time, the combined firm suffered dwindling business from individual investors as its focus was shifted to large corporate transactions. The Hutton brand was used until 1990, when American Express abandoned the name and the business was renamed Shearson Lehman Brothers. Joe Plumeri became the President & Managing Partner of Shearson Lehman Brothers in 1990.
In 1992, Shearson sold the Boston Company, an asset management group, to Mellon Financial
Mellon Financial
Mellon Financial Corporation, was one of the world's largest money management firms. Based in Pittsburgh, Pennsylvania, it was in the business of institutional and high-net-worth-individual asset management, including the Dreyfus family of mutual funds; business banking; and shareholder and...
. In December 1988, the Boston Company, had disclosed that it had overreported its earnings by $30 million.
Sale and spinoff
When Harvey GolubHarvey Golub
Harvey Golub is a business executive, most recently the Chairman of the Board at American International Group . His resignation as AIG chair was announced on July 16, 2010...
became CEO of American Express in 1993, he negotiated the sale of Shearson's retail brokerage and asset management
Investment management
Investment management is the professional management of various securities and assets in order to meet specified investment goals for the benefit of the investors...
business to Primerica. Primerica's Sanford I. Weill
Sanford I. Weill
Sanford I. "Sandy" Weill is an American banker, financier and philanthropist. He is a former chief executive officer and chairman of Citigroup. He served in those positions until October 1, 2003, and April 18, 2006, respectively....
had been the architect of the what had become Shearson/American Express in the 1960s and 1970s building up his small firm Cogan, Berlind, Weill & Levitt
Cogan, Berlind, Weill & Levitt
Cogan, Berlind, Weill & Levitt, originally Carter, Berlind, Potoma & Weill, was an American investment banking and brokerage firm founded in 1960 and acquired by American Express in 1981. In its two decades as an independent firm, Cogan, Berlind, Weill & Levitt served as a vehicle for the rollup...
into one of the largest brokerage firms in the US. The Shearson business was merged with Primerica's Smith Barney
Smith Barney
Morgan Stanley Smith Barney is a retail brokerage joint venture between Morgan Stanley and Citigroup.On January 13, 2009, Morgan Stanley and Citigroup announced that Citigroup would sell 51% of Smith Barney to Morgan Stanley, creating Morgan Stanley Smith Barney, which was formerly a division of...
to create Smith Barney Shearson. Ultimately, the Shearson name was dropped in 1994.
In 1994, American Express spun off of the remaining investment banking and institutional businesses as Lehman Brothers Holdings Inc
Lehman Brothers
Lehman Brothers Holdings Inc. was a global financial services firm. Before declaring bankruptcy in 2008, Lehman was the fourth largest investment bank in the USA , doing business in investment banking, equity and fixed-income sales and trading Lehman Brothers Holdings Inc. (former NYSE ticker...
which after almost fifteen years of independence would file for bankruptcy protection in 2008
Bankruptcy of Lehman Brothers
Lehman Brothers filed for Chapter 11 bankruptcy protection on September 15, 2008. The bankruptcy of Lehman Brothers remains the largest bankruptcy filing in U.S...
.
The Shearson name over time
- Shearson Hammill & Co., 1901–1974, an investment banking and brokerage firm founded by Edward Shearson
- Shearson Hayden Stone, 1974–1979, formed through the merger of Shearson, Hamill and Hayden, Stone & Co.Hayden, Stone & Co.Hayden, Stone & Co. was a major securities firm founded in 1892 by Charles Hayden and Galen L. Stone. The firm was acquired by Cogan, Berlind, Weill & Levitt in 1972 and was part of what ultimately would become Shearson/American Express in 1981.-History:...
- Shearson Loeb Rhoades, 1979–1981, formed through the merger of Shearson Hayden Stone and Loeb Rhoades & Co.
- Shearson/American Express, 1981–1984, formed through the acquisition of Shearson Loeb Rhoades by American ExpressAmerican ExpressAmerican Express Company or AmEx, is an American multinational financial services corporation headquartered in Three World Financial Center, Manhattan, New York City, New York, United States. Founded in 1850, it is one of the 30 components of the Dow Jones Industrial Average. The company is best...
- Shearson Lehman/American Express, 1984–1988, formed through the acquisition of Lehman Brothers Kuhn Loeb
- Shearson Lehman Hutton, 1988–1990, formed through the acquisition of E.F. Hutton & Co.
- Shearson Lehman Brothers, 1990–1993
- Smith Barney Shearson, 1993–1994, formed through the acquisition of Shearson by Primerica in 1993 and merger with its Smith BarneySmith BarneyMorgan Stanley Smith Barney is a retail brokerage joint venture between Morgan Stanley and Citigroup.On January 13, 2009, Morgan Stanley and Citigroup announced that Citigroup would sell 51% of Smith Barney to Morgan Stanley, creating Morgan Stanley Smith Barney, which was formerly a division of...
unit, prior to the discontinuation of the Shearson name
Acquisition history
The following is an illustration of the company's major mergers and acquisitions and historical predecessors (this is not a comprehensive list):Notable former employees
- Richard DonchianRichard DonchianRichard Davoud Donchian was an Armenian-American commodities and futures trader, and pioneer in the field of managed futures....
, noted commodities and futures trader - Elaine GarzarelliElaine GarzarelliElaine M. Garzarelli is an American financial analyst.-Biography:Garzarelli was born in Pennsylvania, United States, North America.Garzarelli received her undergraduate degree from the Drexel Institute of Technology in 1969...
, stock research analyst credited with predicting the Black Monday stock market crash of 1987Black Monday (1987)In finance, Black Monday refers to Monday October 19, 1987, when stock markets around the world crashed, shedding a huge value in a very short time. The crash began in Hong Kong and spread west to Europe, hitting the United States after other markets had already declined by a significant margin... - Stacy JohnsonStacy JohnsonStacy Johnson is an author and creator and host of Money Talks, a nationally syndicated consumer/personal finance news series.-Early life and education:...
, author and host of Money TalksMoney TalksMoney Talks is a 1997 American comedy film directed by Brett Ratner, starring Chris Tucker and Charlie Sheen.- Plot :Franklin Hatchett is a car wash hustler, who gets dimed out to the police by an investigating news reporter named James Russell When placed on a prison transport unit, he is... - Frederick H. Joseph, former CEO of Drexel Burnham LambertDrexel Burnham LambertDrexel Burnham Lambert was a major Wall Street investment banking firm, which first rose to prominence and then was forced into bankruptcy in February 1990 by its involvement in illegal activities in the junk bond market, driven by Drexel employee Michael Milken. At its height, it was the...
, co-founder of Morgan Joseph - Joe Plumeri, Citigroup executive, Chairman & CEO of Willis Group HoldingsWillis Group HoldingsWillis Group Holdings is a global insurance broker headquartered in the Willis Building, London, United Kingdom. It has more than 400 offices in 120 countries, and approximately 17,000 employees...
, and owner of the Trenton ThunderTrenton ThunderThe Trenton Thunder are an American Minor League Baseball team and are the Double-A affiliate of the New York Yankees. The Thunder play in the Eastern Division of the Eastern League, and are the two-time defending league champions... - Peter SchiffPeter SchiffPeter David Schiff is an American investment broker, author and financial commentator. Schiff is CEO and chief global strategist of Euro Pacific Capital Inc., a broker-dealer based in Westport, Connecticut and CEO of Euro Pacific Precious Metals, LLC, a gold and silver dealer based in New York...
- Otto SchubertOtto SchubertOtto Schubert Jr. was a hotelier under whose management the Adolphus Hotel in Dallas, Texas grew to national prominence.-Career:...
- Edward ShearsonEdward ShearsonEdward Shearson was a banker, millionaire and founder of Shearson, Hammill & Co., which was among the largest brokerage and investment banking firms in the United States....
, founder - Randolph L. SpeightRandolph L. SpeightRandolph L. Speight was an American jurist and director of the Pioneer Fund.He was a partner at Shearson Hamill. He also worked at Brown, Harris, Stevens. A resident of Smith's Parish, Bermuda after retirement, he died suddenly in Mexico.-External links:**...
- Sanford I. WeillSanford I. WeillSanford I. "Sandy" Weill is an American banker, financier and philanthropist. He is a former chief executive officer and chairman of Citigroup. He served in those positions until October 1, 2003, and April 18, 2006, respectively....
, CEO of CitigroupCitigroupCitigroup Inc. or Citi is an American multinational financial services corporation headquartered in Manhattan, New York City, New York, United States. Citigroup was formed from one of the world's largest mergers in history by combining the banking giant Citicorp and financial conglomerate...
who consolidated numerous investment banking firms under the Shearson brand before selling the company to American ExpressAmerican ExpressAmerican Express Company or AmEx, is an American multinational financial services corporation headquartered in Three World Financial Center, Manhattan, New York City, New York, United States. Founded in 1850, it is one of the 30 components of the Dow Jones Industrial Average. The company is best...
See also
- American ExpressAmerican ExpressAmerican Express Company or AmEx, is an American multinational financial services corporation headquartered in Three World Financial Center, Manhattan, New York City, New York, United States. Founded in 1850, it is one of the 30 components of the Dow Jones Industrial Average. The company is best...
- Lehman BrothersLehman BrothersLehman Brothers Holdings Inc. was a global financial services firm. Before declaring bankruptcy in 2008, Lehman was the fourth largest investment bank in the USA , doing business in investment banking, equity and fixed-income sales and trading Lehman Brothers Holdings Inc. (former NYSE ticker...
- E. F. Hutton & Co.E. F. Hutton & Co.E. F. Hutton & Co. was an American stock brokerage firm founded in 1904 by Edward Francis Hutton, his brother Franklyn Laws Hutton, and later led by well known Wall Street trader Gerald M. Loeb. Under their leadership, Hutton became one of the most respected financial firms in the United States...
- Hayden Stone & Co.
- Shearson, Hammill & Co.Shearson, Hammill & Co.Shearson, Hammill & Co. was a Wall Street brokerage and investment banking firm founded in 1902 by Edward Shearson and Caleb Wild Hammill. The firm originally built its business as a stock broker as well as a broker of various commodities, particularly grain and cotton...