Shearson Lehman Hutton was the result of the combination of several
Wall Street 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.
Shearson Hammill & Co. (1902–1974) (), founder of Shearson, Hammill & Co. The Shearson name traces its origins to the formation of
Shearson, Hammill & Co., 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. 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. 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.
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 in 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. Weill'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.
Shearson Lehman Brothers 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.
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.
Shearson Lehman Hutton 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". 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. 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.
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. 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==