Founding Founded in 1910 by Arthur, Herbert, and Percy Salomon, and a clerk, Ben Levy. The founding Salomon Brothers are descendants of
Haym Salomon, primary financier of the American Revolutionary War, Consul to France, and childhood friend to Robert Morris, Founding Father and Superintendent of Finance of the United States. The company remained a
partnership until the early 1980s.
William Salomon, the son of Percy Salomon, became a
managing partner and the head of the company in 1963. In 1967, Salomon Brothers sponsored
Muriel Siebert, the first woman to obtain a trading license on the floor of the New York Stock Exchange.
Top ranking and public financing: 1970-1979 In 1975, Salomon Brothers was formally recognized by other top investment banks as a "
bulge bracket" firm, meaning it was one of the leaders in investment banking. In 1979, Salomon Brothers scored a major coup when IBM insisted that Morgan Stanley accept Salomon Brothers as co-manager on a $1-billion debt issue for a new generation of IBM computers. Morgan Stanley demanded sole management, but IBM affirmed Salomon Brothers’ role as co-manager. In 1975, Salomon Brothers also aided the state's efforts to save New York City from bankruptcy. When the Municipal Action Committee (MAC) was established, and bonds were created in its name, Salomon Brothers and Morgan Guaranty Trust organized syndicates for the $1 billion bond sale. Both of the organizations were able to place the bonds successfully.
Salomon Brothers during the 1980s In 1981, it was acquired by the
commodity trading firm
Phibro Corporation and became
Salomon Inc. It was the
reverse merger that enabled Gutfreund to take the company public. Gutfreund became the
CEO of the company following the reverse merger. Shortly thereafter, Salomon purchased
home mortgages from
thrifts throughout the United States and packaged them into mortgage-backed securities, which it sold to local and international investors. Later, it moved away from traditional investment banking (helping companies raise funds in the
capital market and negotiating
mergers and acquisitions) to almost exclusively
proprietary trading (the buying and selling of
stocks, bonds,
options, etc. for the profit of the company itself). Salomon had expertise in
fixed income securities and trading based on daily swings in the
bond market. The firm competed for the leveraged buyout of
RJR Nabisco and the leveraged buyout of
Revco stores (which ended in failure). In 1987, a New York Times report identified Salomon Brothers as one of the top firms, along with Merrill Lynch, Morgan Stanley, and Goldman Sachs. However, Salomon Brothers went through significant turmoil during the year. In July,
Lewis Ranieri, the firm's vice chairman and the head of the mortgage trading department, was forced out. By September, Salomon's stock had fallen by more than 9% for the year due to trading losses in the bond market. The firm's largest shareholder,
Bermuda-based
Minorco, controlled by
Harry Oppenheimer, sought to sell its 14% stake.
Revlon owner
Ronald Perelman, funded by
Michael Milken of
Drexel Burnham Lambert, expressed an interest in acquiring Minorco's 21.3 million shares worth $800 million. However, Salomon management, wary that Perelman sought more than Minorco's shares, sought the help of investor
Warren Buffett to purchase the shares themselves by selling $700 million worth of convertible
preferred stock to Buffett's firm
Berkshire Hathaway and giving it two seats on the Salomon board. Salomon Brothers' success in the 1980s is documented in
Michael Lewis' 1989 book, ''
Liar's Poker''. Lewis went through Salomon's training program and then became a bond salesman at Salomon Brothers in
London. Lewis presented an insider account of life at Salomon Brothers, and his book became a seminal work on the firm's corporate culture in the 1980s. Lewis describing the trading floor at Salomon:
1990s treasury bonds crisis In 1991,
U.S. Treasury Deputy Assistant Secretary Mike Basham learned that Salomon trader Paul Mozer had been submitting false bids in an attempt to purchase more
treasury bonds than permitted by one buyer during the period between December 1990 and May 1991. Mozer and Thomas Murphy used unauthorised accounts to purchase four-year Treasury notes in December 1990 and five-year Treasury notes in February 1991. Including separate purchases the company had made in its own name, the total purchases exceeded the 35 percent limit on issues. Salomon was fined $190million for this infraction, and required to set aside $100million in a restitution fund for any injured parties. In December 1993, Mozer was sentenced to four months in a minimum-security prison and fined $30,000. CEO Gutfreund left the company in August 1991 and a
U.S. Securities and Exchange Commission (SEC) settlement resulted in a fine of $100,000 and Gutfreund being barred from serving as a chief executive of a brokerage firm.
Warren Buffett briefly stepped into the CEO and chairman position. Buffett later promoted
Deryck Maughan to take over as chairman and CEO. The scandal was then documented in the 1993 book
Nightmare on Wall Street: Salomon Brothers and the Corruption of the Marketplace by Martin Mayer. The firm's top bond traders called themselves "Big Swinging Dicks," and were the inspiration for the novel
The Bonfire of the Vanities, written by
Tom Wolfe. The expression "Big Swinging Dick(s)" itself was used to refer to the Salomon bankers who dominated the game of extraordinary profit-making. The last years of Salomon Brothers, culminating in its involvement with LTCM, are chronicled in the 2007 book
A Demon of Our Own Design by
Richard Bookstaber. The firm was acquired by
Travelers Group in 1997 for $9 billion.
Acquisition by Citigroup Salomon (NYSE:SB) was acquired by
Travelers Group in 1997 for $9 billion; and, following the latter's merger with
Citicorp in 1998, Salomon became part of
Citigroup. The combined investment banking operations became known as Salomon Smith Barney.
7 World Trade Center, which had served as the headquarters for Salomon Brothers, continued to be used as the company's main office after the company was merged into Salomon Smith Barney. Although the Salomon name carried on as Salomon Smith Barney, the investment banking operations of Citigroup, the division was renamed on 7 April 2003 to "Citigroup Global Markets Inc." As of 2020, Citigroup no longer owns the Salomon Brothers trademark, according to the records provided by the
United States Patent and Trademark Office. == Notable employees ==