Jump to content

Shearson

From Alfawiki
Shearson
Company typePrivate (historically)
IndustryInvestment banking, Brokerage
Founded1902
FounderEdward Shearson
Defunct1994
FateMerged with Smith Barney; brand discontinued
Headquarters
New York City
,
United States
ProductsFinancial services, Brokerage, Investment banking

Shearson refers to a succession of investment banking and retail brokerage companies operating from 1902 until 1994, named after its founder Edward Shearson and his original firm, Shearson Hammill & Co.. Notable versions of the company included Shearson / American Express, Shearson Lehman / American Express, Shearson Lehman Brothers, Shearson Lehman Hutton, and Smith Barney Shearson.

For nearly eighty years, Shearson remained an independent entity before merging with various prominent Wall Street firms such as Hayden Stone & Co. and Loeb Rhoades & Co.. The company was acquired by American Express in 1981, subsequently combining with Lehman Brothers Kuhn Loeb in 1984 and later with E.F. Hutton & Co. in 1988.

In 1993, ownership of Shearson transferred to Primerica, a forerunner of Citigroup, where it merged with Primerica’s retail brokerage division, Smith Barney, resulting in the creation of Smith Barney Shearson. The Shearson brand was discontinued in 1994.

History

The entity known as Shearson Lehman Hutton originated from the amalgamation of several leading Wall Street institutions over approximately 25 years beginning in the early 1960s. These included firms such as Lehman Brothers, Kuhn Loeb, E.F. Hutton, Hayden Stone & Co., Shearson, Hammill & Co., Loeb, Rhoades & Co., Hornblower & Company, and Cogan, Berlind, Weill & Levitt. Ultimately, these were consolidated under the ownership of American Express.

Shearson Hammill & Co. (1902–1974)

Established in 1902 by Edward Shearson alongside Caleb Wild Hammill, Shearson, Hammill & Co. operated as a Wall Street brokerage and investment banking firm initially focusing on stock and commodity brokerage sectors, notably grain and cotton. The firm held memberships on the New York Stock Exchange, Chicago Stock Exchange, and Chicago Mercantile Exchange.

Prior to founding the company, Edward Shearson gained valuable experience as comptroller at both U.S. Steel and Federal Steel Company, which informed the firm's financial services expertise. Caleb Wild Hammill contributed his knowledge from working within Chicago and New York markets.

The main office was situated in New York City’s Empire Building at 71 Broadway, complemented by a significant branch in Chicago. By the conclusion of World War I, the firm operated six branch offices and maintained seven correspondent relationships.

During the 1960s, Shearson Hammill became widely recognized through advertising campaigns featuring the tagline: "If You Want To Know What’s Going On On Wall Street, Ask Shearson Hammill." At that time, it had expanded to include 63 offices throughout the United States and internationally, supported by a reputable securities research division.

Shearson Hayden Stone (1974–1979)

In the early 1970s, amid the turmoil caused by the 1973–1974 stock market crash, Shearson encountered financial difficulties that led to substantial workforce reductions in 1973. At the same time, Sanford I. Weill—chairman of Cogan, Berlind, Weill & Levitt—was actively acquiring well-established Wall Street firms. By 1973, his organization was operating under the name Hayden Stone, Inc. following its acquisition of Hayden, Stone & Co.. Although Shearson maintained a strong retail brokerage presence, its capital reserves had been significantly diminished. Consequently, in 1974 it merged with the financially stronger Hayden Stone, Inc., creating Shearson Hayden Stone while preserving the recognizable Shearson name.

Shearson Loeb Rhoades (1979–1981)

In 1979, Shearson completed an $83 million all-stock acquisition of the struggling investment bank Loeb, Rhoades, Hornblower & Co. over Mother's Day Weekend. The newly combined entity, named Shearson Loeb Rhoades and led by CEO Sanford I. Weill, controlled $260 million in assets and generated $550 million in revenue. This positioned the firm as one of the largest investment banks in the United States and second only to Merrill Lynch in brokerage scale. The merger significantly enhanced Shearson's capabilities within investment banking.

Shearson/American Express

During the 1980s, American Express pursued the creation of a comprehensive financial services conglomerate by acquiring Shearson Loeb Rhoades in 1981, which was then under Sanford I. Weill’s leadership. At the time of purchase, Shearson Loeb Rhoades ranked as the second-largest securities firm with $250 million in capital, behind only Merrill Lynch. Following the acquisition, the company was rebranded as Shearson/American Express.

Afterward, Weill was appointed president of American Express in 1983 and subsequently became chairman and CEO of its insurance division in 1984. Nevertheless, disagreements with American Express CEO James D. Robinson III and limited opportunities for further advancement prompted Weill to resign in 1985 after Shearson's merger with Lehman Brothers Kuhn Loeb. He eventually established what evolved into Citigroup, reacquiring the core Shearson brokerage operations he originally developed.

Shearson Lehman Brothers

In 1984, American Express acquired Lehman Brothers Kuhn Loeb, a firm specializing in investment banking and trading, and merged it with Shearson to create Shearson Lehman/American Express.

Lehman Brothers Kuhn Loeb itself resulted from a 1977 merger between Lehman Brothers and Kuhn Loeb and was led by Pete Peterson—former U.S. Secretary of Commerce and later founder of Blackstone Group. By the early 1980s, internal conflicts between the firm’s investment bankers and traders escalated, leading Peterson to appoint Lewis Glucksman, a former trader who was then President and COO, as co-CEO in 1983. Glucksman's initiatives intensified these disputes, culminating in a power struggle that removed Peterson and made Glucksman sole CEO. This upheaval caused key bankers to leave and pressured Glucksman into selling the company. Following the merger, Peter A. Cohen assumed the roles of Chairman and CEO at Shearson Lehman.

Shearson Lehman pursued aggressive growth in leveraged finance to compete with Drexel Burnham Lambert. In 1989, it supported F. Ross Johnson’s management buyout bid for RJR Nabisco but was ultimately outbid by Kohlberg Kravis Roberts with Drexel’s backing.

Also in 1984, Shearson/American Express expanded its reach by acquiring Investors Diversified Services, thereby adding an extensive network of financial advisors and investment products.

Shearson Lehman Hutton

In 1988, Shearson Lehman acquired E.F. Hutton & Co., a prominent brokerage founded in 1904 by Edward Francis Hutton and his brother Franklyn Laws Hutton. Under leaders such as Robert M. Fomon and trader Gerald M. Loeb, Hutton grew into one of America’s largest brokerage firms, recognized for its memorable advertising campaigns.

Throughout the 1980s, Hutton encountered serious difficulties including a 1985 check-kiting scandal involving "chaining"—the practice of writing checks against accounts before funds had cleared—effectively generating interest-free loans. In early 1987, an internal probe revealed money laundering activities connected to the Patriarca crime family at its Providence office. Despite reporting these findings to the SEC, prosecutors anticipated indictments. This scandal surfaced shortly before the stock market crash of 1987; by November that year, Hutton had incurred $76 million in losses due to trading setbacks and margin calls.

On December 3, 1987, Hutton agreed to merge with Shearson Lehman in a deal valued at $1 billion that took effect in 1988, resulting in Shearson Lehman Hutton, Inc.

Following the merger, numerous former Hutton brokers left for rival firms while the combined company shifted its strategic focus from retail investors toward larger corporate deals. The Hutton name was discontinued in 1990 when American Express rebranded the operation as Shearson Lehman Brothers. That same year Joe Plumeri was appointed President & Managing Partner.

In 1992, Shearson divested the Boston Company asset management division to Mellon Financial; notably, Boston Company had disclosed an earnings overstatement totaling $30 million back in December 1988.

Sale and divestiture

Upon assuming the role of CEO at American Express in 1993, Harvey Golub orchestrated the divestiture of Shearson's retail brokerage and asset management divisions to Primerica. Sanford I. Weill, Primerica's leader, had expanded Shearson/American Express from his original firm, Cogan, Berlind, Weill & Levitt, into a prominent brokerage in the United States. Subsequently, Shearson was combined with Primerica's Smith Barney, creating Smith Barney Shearson, with the Shearson brand being retired in 1994.

In 1994, American Express separated its remaining investment banking and institutional operations, establishing Lehman Brothers, which ultimately declared bankruptcy in 2008.

Evolution of the Shearson name

  • 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, Hammill and Hayden, Stone & Co.
  • Shearson Loeb Rhoades, 1979–1981: created by merging with Loeb Rhoades & Co.
  • Shearson/American Express, 1981–1984: following acquisition by American Express
  • Shearson Lehman/American Express, 1984–1988: after acquiring Lehman Brothers Kuhn Loeb
  • Shearson Lehman Hutton, 1988–1990: subsequent to the acquisition of E.F. Hutton & Co.
  • Shearson Lehman Brothers, 1990–1993
  • Smith Barney Shearson, 1993–1994: after sale to Primerica and merger with Smith Barney; the Shearson name was discontinued

Acquisition timeline

The company's significant mergers and acquisitions can be traced through its key predecessor organizations:

Distinguished alumni

Related topics

References

Retrieved from "https://www.alfawiki.org/index.php?title=Shearson&oldid=20866"