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Shearson Hayden Stone

From Alfawiki
Shearson
Company typeSubsidiary (1981–1993)
IndustryInvestment banking, Retail brokerage
Founded1902
FounderEdward Shearson
Defunct1994
FateMerged into Smith Barney Shearson; brand retired
Headquarters
New York City
,
United States
Key people
Edward Shearson, Sanford I. Weill, Peter A. Cohen, Joe Plumeri
ProductsBrokerage services, Investment banking, Financial services
ParentAmerican Express (1981–1993); Primerica (1993–1994)

Shearson refers to a succession of investment banking and retail brokerage companies that operated from 1902 until 1994, bearing the name of its founder, Edward Shearson, and his original firm, Shearson Hammill & Co.. Prominent 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, the company functioned as an independent entity before merging with several major Wall Street securities firms such as Hayden Stone & Co. and Loeb Rhoades & Co.. In 1981, American Express acquired Shearson, which then operated as its subsidiary. Subsequent mergers included combining with Lehman Brothers Kuhn Loeb in 1984 and later with E.F. Hutton & Co. in 1988.

In 1993, Shearson was purchased by Primerica, a forerunner of Citigroup, and integrated with its retail brokerage division, Smith Barney, creating Smith Barney Shearson. The Shearson brand was retired the following year in 1994.

History

The formation of Shearson Lehman Hutton was the outcome of a series of mergers among several Wall Street firms over a quarter-century starting in the early 1960s. These included 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 entities were consolidated under the ownership of American Express.

Shearson Hammill & Co. (1902–1974)

The origin of the Shearson name traces back to Shearson, Hammill & Co., a Wall Street brokerage and investment banking firm established in 1902 by Edward Shearson and Caleb Wild Hammill. The company specialized in stock and commodities brokerage, particularly focusing on grain and cotton markets. It held memberships in the New York Stock Exchange, the Chicago Stock Exchange, and the Chicago Mercantile Exchange.

Before founding this firm, Edward Shearson had served as comptroller at both Federal Steel Company and later at U.S. Steel. Originally from Ontario, Canada, he began his professional journey auditing railroads before moving into the steel industry in 1898 and was well-regarded in New York social circles. Caleb Hammill grew up in Albion, Michigan, eventually relocating to Chicago and New York.

Initially headquartered in the Empire Building at 71 Broadway in New York City with a principal office in Chicago, by the conclusion of World War I, Shearson Hammill operated six branch offices along with seven correspondent relationships.

During the 1960s, the firm gained public recognition through advertising campaigns that emphasized its market knowledge using the slogan "If You Want To Know What’s Going On On Wall Street, Ask Shearson Hammill." At this time, it maintained 63 offices throughout the United States and abroad, backed by a highly regarded securities research team.

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. During this period, Sanford I. Weill—chairman of Cogan, Berlind, Weill & Levitt—acquired several prominent Wall Street firms. By 1973, his company had been renamed Hayden Stone, Inc. following its acquisition of Hayden, Stone & Co.. Although Shearson maintained a strong retail brokerage presence, its capital reserves were significantly strained. This situation resulted in a 1974 merger with the better-capitalized Hayden Stone firm. The merged organization was branded as Shearson Hayden Stone, preserving the established Shearson name as a leading brokerage and underwriting firm.

Shearson Loeb Rhoades (1979–1981)

In 1979, Weill set his sights on Loeb, Rhoades, Hornblower & Co., a company experiencing financial difficulties. During Mothers Day Weekend, Shearson and Loeb consented to an $83 million all-stock merger, creating Shearson Loeb Rhoades with Weill as the chief executive officer. The combined entity possessed $260 million in assets and produced roughly $550 million in revenue, ranking it among the top investment banks and establishing it as the second largest brokerage firm in the United States after Merrill Lynch. This merger significantly enhanced Shearson's investment banking division.

Shearson/American Express

Throughout the 1980s, American Express aimed to develop a comprehensive financial services conglomerate by acquiring Sanford I. Weill's Shearson Loeb Rhoades in mid-1981. At the time of acquisition, Shearson Loeb Rhoades was the second largest U.S. securities firm with $250 million in capital, and it was rebranded as Shearson/American Express. This acquisition followed a series of mergers during the 1970s that had formed Shearson Loeb Rhoades from Hayden Stone, Inc., Shearson, Hammill & Co., and Loeb, Rhoades, Hornblower & Co.

Following the acquisition, Weill was appointed president of American Express in 1983 and subsequently became chairman and CEO of its insurance subsidiary, Fireman's Fund Insurance Company, in 1984. However, disagreements with CEO James D. Robinson III and limited advancement opportunities prompted Weill to resign in August 1985 after American Express merged with Lehman Brothers Kuhn Loeb. Subsequently, he established what would evolve into Citigroup, reacquiring the foundational Shearson brokerage business he originally developed.

Shearson Lehman Brothers

In 1984, American Express purchased Lehman Brothers Kuhn Loeb, an investment banking and trading firm, integrating it into the Shearson group 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 future founder of Blackstone Group. By the early 1980s, conflicts between investment bankers and traders prompted Peterson to appoint Lewis Glucksman as co-CEO alongside him in 1983; Glucksman was then President and COO. Glucksman’s leadership style combined with market downturns escalated tensions, leading to Peterson's removal and Glucksman assuming sole CEO responsibilities. This turmoil caused significant banker departures and pressured Glucksman to sell the firm. After the merger, Peter A. Cohen was appointed Chairman and CEO of Shearson Lehman.

During this era, Shearson Lehman aggressively grew its leveraged finance operations, emulating competitor Drexel Burnham Lambert. In 1989, Shearson backed F. Ross Johnson’s management buyout bid for RJR Nabisco but was ultimately outbid by Kohlberg Kravis Roberts with Drexel’s support.

Also in 1984, Shearson/American Express acquired Investors Diversified Services—a company with a 90-year history—thereby expanding its network of financial advisors and broadening its investment product offerings.

Shearson Lehman Hutton

In 1988, Shearson Lehman acquired E.F. Hutton & Co., a brokerage established in 1904 renowned for its strong market presence and memorable slogan "When E.F. Hutton talks, people listen."

Throughout the 1980s, Hutton encountered serious difficulties including a 1985 check kiting scandal involving “chaining” checks across multiple banks to secure interest-free loans. In 1987, an internal investigation uncovered money laundering connections to the Patriarca crime family at its Providence office. Although these findings were reported to the SEC, Hutton faced impending indictment. These legal troubles coincided with substantial trading losses during the stock market crash of 1987, culminating in a $76 million deficit by November.

On December 3, 1987, Hutton consented to merge with Shearson Lehman in a $1 billion transaction effective in 1988, forming Shearson Lehman Hutton, Inc.

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

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

Sale and spinoff

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 modest enterprise, Cogan, Berlind, Weill & Levitt, into a prominent brokerage firm in the United States. The Shearson operations were combined with Primerica's Smith Barney, creating Smith Barney Shearson; the Shearson brand was subsequently retired in 1994.

In 1994, American Express separated its remaining institutional and investment banking units, forming Lehman Brothers, which later declared bankruptcy in 2008.

Evolution of the Shearson name

  • Shearson Hammill & Co., 1901–1974: an investment banking and brokerage company founded by Edward Shearson
  • Shearson Hayden Stone, 1974–1979: resulted from the merger of Shearson, Hammill and Hayden, Stone & Co.
  • Shearson Loeb Rhoades, 1979–1981: formed through the union of Shearson Hayden Stone and Loeb Rhoades & Co.
  • Shearson/American Express, 1981–1984: following American Express's acquisition of Shearson Loeb Rhoades
  • Shearson Lehman/American Express, 1984–1988: after acquiring Lehman Brothers Kuhn Loeb
  • Shearson Lehman Hutton, 1988–1990: subsequent to the purchase of E.F. Hutton & Co.
  • Shearson Lehman Brothers, 1990–1993
  • Smith Barney Shearson, 1993–1994: formed through Primerica’s acquisition and merger with Smith Barney before discontinuing the Shearson name

Acquisition history

The firm's progression is marked by significant mergers and acquisitions involving major financial entities:

Distinguished former personnel

See also

References

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