Shearson was the name of a series of investment banking and retail brokerage firms from 1902 until 1994, named for Edward Shearson[1][2] 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.
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.[1] Hammill, who was raised in Albion, Michigan, moved first to Chicago and subsequently to New York in 1890.
Shearson, Hammill logo ca. 1960
The firm was originally headquartered in the Empire Building at 71 Broadway in New York City and maintained another main office in Chicago.[5] By the end of World War I, Shearson Hammill had six branch offices and seven correspondents.[6]
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".[7] The firm had 63 offices in the US and internationally supported by a well-regarded securities research department.[8]
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.[9] Meanwhile, through the 1960s and 1970s, Sanford I. Weill, 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.[10]
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 in 1979, Shearson and Loeb agreed to an $83 million ($334.7 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.[11][12]
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.
In 1984, American Express acquired the investment banking and trading firm, Lehman Brothers Kuhn Loeb, and added it to the Shearson family, creating Shearson Lehman/American Express.
Shearson Lehman logo
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.[13] 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,[14]
In 1984, Shearson/American Express purchased the 90-year-old Investors Diversified Services, bringing with it a fleet of financial advisors and investment products.
In 1988, Shearson Lehman acquired E.F. Hutton & Co., a brokerage firm founded in 1904 by Edward Francis Hutton 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".
Shearson Lehman Hutton logo
In the 1980s, Hutton was caught up 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.[15][16] 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.[17] 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 ($2,575,864,089 today) deal. The merger took effect in 1988, and the merged firm was named Shearson Lehman Hutton, Inc.[18]
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.[19] 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.[20][21]
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.
Sale and spinoff
When Harvey Golub 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 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.[3]
In 1994, American Express spun off of the remaining investment banking and institutional businesses as Lehman Brothers. In 2008, the bankruptcy of Lehman Brothers ended that firm.
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.
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 Express
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 Barney 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):[22]
EF Hutton was an American stock brokerage firm founded in 1904 by Edward Francis Hutton and his brother, Franklyn Laws Hutton. Later, it was led by well known Wall Street trader Gerald M. Loeb. Under their leadership, EF Hutton became one of the most respected financial firms in the United States and for several decades was the second largest brokerage firm in the country.
American Express Company (Amex) is an American bank holding company and multinational financial services corporation that specializes in payment cards. It is headquartered at 200 Vesey Street, also known as American Express Tower, in the Battery Park City neighborhood of Lower Manhattan. AMEX cards are primarily categorized in the order of Green, Gold, Platinum, and Black (Centurion), with a higher rank indicating a higher priority level.
Sanford I. "Sandy" Weill is an American banker, financier and philanthropist. He is a former chief executive and chairman of Citigroup. He served in those positions from 1998 until October 1, 2003, and April 18, 2006, respectively.
Morgan Stanley Wealth Management is an American multinational financial services corporation specializing in retail brokerage. It is the wealth & asset management division of Morgan Stanley. 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 Citi Global Wealth Management. The combined brokerage house has 17,646 financial advisors and manages $2 trillion in client assets. Clients range from individual investors to small- and mid-sized businesses, as well as large corporations, non-profit organizations and family foundations.
Lehman Brothers Inc. was an American global financial services firm founded in 1850. Before filing for bankruptcy in 2008, Lehman was the fourth-largest investment bank in the United States, with about 25,000 employees worldwide. It was doing business in investment banking, equity, fixed-income and derivatives sales and trading, research, investment management, private equity, and private banking. Lehman was operational for 158 years from its founding in 1850 until 2008.
Kuhn, Loeb & Co. was an American multinational investment bank founded in 1867 by Abraham Kuhn and his brother-in-law Solomon Loeb. Under the leadership of Jacob H. Schiff, Loeb's son-in-law, it grew to be one of the most influential investment banks in the late 19th and early 20th centuries, financing America's expanding railways and growth companies, including Western Union and Westinghouse, and thereby becoming the principal rival of J.P. Morgan & Co.
A. G. Becker & Co. was an investment bank based in Chicago, Illinois, United States.
Lewis L. Glucksman was a former Lehman Brothers trader and former chief executive officer and chairman of Lehman Brothers, Kuhn, Loeb Inc.
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, after its name disappeared in 1979, was part of what would become Shearson/American Express in 1981.
H. J. Meyers & Co, Inc. of Rochester, New York is a defunct investment banking and brokerage firm that specialized in small cap and micro cap financings. It was originally known as Thomas James Associates, Inc before they acquired H.J. Meyers & Co, Inc. The firm had a reputation of being a boiler room that operated within the realm of unscrupulous policies, stock manipulation, fraudulent, high pressure sales tactics and excessive markups were common.
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. The firm was a member of the New York Stock Exchange, the Chicago Stock Exchange and the Chicago Mercantile Exchange.
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 Express and three years later Shearson Lehman/American Express.
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 of more than a dozen brokerage and securities firms led by Sanford I. Weill that culminated in the formation of Shearson Loeb Rhoades.
Shearson was a well-known brand in the financial services industry from 1901 through 1993, related to the following:
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.
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 United States and Europe.
Frederick H. Joseph was the former president and chief executive officer of the investment bank Drexel Burnham Lambert during the 1980s.
Peter A. Cohen is the chairman and CEO of Andover National Corporation, a public holding company. He was formerly the chairman and CEO of Cowen Inc., also known as Cowen & Company now TD Cowen. Prior to his current role, Cohen founded Ramius Capital Management in 1994, a $13 billion investment firm, which he merged with Cowen Inc. in 2009. Prior to this, Cohen was the chairman and chief executive officer of Shearson Lehman American Express from 1983 through 1991.
Joseph J. Plumeri II is vice chairman of the First Data Board of Directors. He was the chairman and CEO of Willis Group Holdings (Willis), a New York Stock Exchange-listed insurance broker, until July 2013. The company has 17,000 employees in 400 offices, located in 120 countries. As of June 2010, Willis had the third-highest insurance brokerage revenues in the world.
John Langeloth Loeb Sr. was an American investor and executive who served as president of Loeb, Rhoades & Company.
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