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Shearson Lehman/American Express

From Alfawiki
Shearson
Company typeSubsidiary (formerly independent)
IndustryInvestment banking, brokerage
Founded1902; 124 years ago (1902)
FounderEdward Shearson, Caleb Wild Hammill
Defunct1994 (1994)
FateMerged into Smith Barney Shearson; brand retired
Headquarters
New York City
,
United States
Area served
United States, international offices
Key people
Sanford I. Weill (CEO during mergers), Peter A. Cohen (Chairman and CEO), Joe Plumeri (President & Managing Partner)
ProductsBrokerage services, investment banking, asset management
ParentAmerican Express (1981–1993), Primerica (1993–1994)

Shearson represented a succession of investment banking and retail brokerage companies spanning from 1902 until 1994, bearing the name of its founder Edward Shearson and the original firm, Shearson Hammill & Co.. Notable versions included Shearson / American Express, Shearson Lehman / American Express, Shearson Lehman Brothers, Shearson Lehman Hutton, and Smith Barney Shearson.

For nearly eighty years, Shearson functioned as an independent entity, engaging in mergers with various Wall Street firms such as Hayden Stone & Co. and Loeb Rhoades & Co.. In 1981, it was purchased by American Express, becoming one of its subsidiaries before merging 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 combined with Primerica's retail brokerage arm, Smith Barney, creating Smith Barney Shearson. The use of the Shearson name ceased in 1994.

History

The formation of Shearson Lehman Hutton resulted from the integration of multiple Wall Street companies over a quarter-century starting 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 businesses were consolidated under the ownership of American Express.

Shearson Hammill & Co. (1902–1974)

The Shearson brand traces back to Shearson, Hammill & Co., a brokerage and investment banking firm established in 1902 by Edward Shearson alongside Caleb Wild Hammill. The company concentrated on stock brokerage and commodity trading, especially in grain and cotton markets. It held memberships at the New York Stock Exchange, the Chicago Stock Exchange, and the Chicago Mercantile Exchange.

Prior to founding this enterprise, Shearson held the position of comptroller at both U.S. Steel and Federal Steel Company. His professional journey began as an auditor for the Wisconsin Central Railroad before transitioning into the steel industry in 1898. Meanwhile, Hammill relocated from Michigan to Chicago and subsequently New York by 1890.

Initially based in the Empire Building at 71 Broadway in New York City, the firm also maintained a significant office presence in Chicago. By the conclusion of World War I, Shearson Hammill operated six branch offices along with seven correspondent offices.

During the 1960s, Shearson Hammill gained prominence for its advertising campaigns highlighting its market knowledge with the tagline "If You Want To Know What’s Going On On Wall Street, Ask Shearson Hammill." At this time, it operated 63 offices domestically and internationally, supported by an esteemed securities research division.

Shearson Hayden Stone (1974–1979)

Facing financial difficulties during the early 1970s amid the 1973–1974 stock market crash, Shearson implemented substantial workforce reductions in 1973. During this era, Sanford I. Weill—chairman of Cogan, Berlind, Weill & Levitt—acquired multiple established Wall Street firms. By 1973, his company was renamed Hayden Stone, Inc. following its purchase of Hayden, Stone & Co.. Although Shearson maintained a robust retail brokerage operation, its capital reserves had diminished considerably; consequently, in 1974 it merged with the more financially stable Hayden Stone. The resulting firm adopted the name Shearson Hayden Stone, preserving the well-established Shearson brand known for underwriting and brokerage services.

Shearson Loeb Rhoades (1979–1981)

The next strategic acquisition by Weill was the faltering investment bank Loeb, Rhoades, Hornblower & Co.. In 1979, Shearson and Loeb finalized an $83 million all-stock merger, resulting in the creation of Shearson Loeb Rhoades, with Weill appointed as CEO. This newly formed entity controlled $260 million in assets and generated approximately $550 million in revenue, positioning it as one of the largest investment banks in the United States and second only to Merrill Lynch among brokerage firms. This merger significantly enhanced Shearson's investment banking operations.

Shearson/American Express

During the 1980s, American Express aimed to establish a comprehensive financial services conglomerate by acquiring Sanford I. Weill’s Shearson Loeb Rhoades in 1981. This firm was itself the result of several mergers during the 1970s—initially with Hayden Stone merging into Shearson in 1974, followed by the 1979 combination with Loeb, Rhoades. At the time of acquisition, Shearson Loeb Rhoades held $250 million in capital and ranked just behind Merrill Lynch in brokerage size. After the purchase, it was rebranded as Shearson/American Express.

Following the sale of Shearson, Weill took on the role of president at American Express in 1983 and subsequently became chairman and CEO of its insurance division, Fireman's Fund Insurance Company. However, disagreements with American Express CEO James D. Robinson III and limited opportunities for advancement prompted Weill to resign in August 1985 after the company merged with Lehman Brothers Kuhn Loeb. He later went on to establish what evolved into Citigroup, regaining control over the core Shearson brokerage business he had originally developed.

Shearson Lehman Brothers

In 1984, American Express acquired Lehman Brothers Kuhn Loeb, an investment banking and trading firm, integrating it into the Shearson group to form Shearson Lehman/American Express.

Lehman Brothers Kuhn Loeb itself was created in 1977 through the merger of Lehman Brothers and Kuhn Loeb and was led by Pete Peterson, a former U.S. Secretary of Commerce and future founder of Blackstone Group. By the early 1980s, friction between investment bankers and traders—who generated most profits—led Peterson to appoint Lewis Glucksman as co-CEO in 1983. Glucksman's leadership approach combined with a market downturn escalated tensions, resulting in Peterson’s departure and Glucksman assuming sole CEO responsibilities. The dissatisfaction caused many bankers to leave, weakening the firm and prompting Glucksman to seek a sale. Following the merger, Peter A. Cohen was appointed Chairman and CEO of Shearson Lehman.

Shearson Lehman pursued aggressive growth in leveraged finance operations modeled after competitor Drexel Burnham Lambert. In 1989, it supported F. Ross Johnson’s management buyout attempt of RJR Nabisco but was ultimately outbid by Kohlberg Kravis Roberts with backing from Drexel.

Also during 1984, Shearson/American Express acquired Investors Diversified Services, thereby expanding its network of financial advisors and broadening its investment product offerings.

Shearson Lehman Hutton

In 1988, Shearson Lehman completed its acquisition of E.F. Hutton & Co., a brokerage established in 1904 by Edward and Franklyn Hutton. Recognized for its famous advertising slogan, E.F. Hutton was one of the largest U.S. brokerage firms but encountered significant difficulties throughout the 1980s.

The company’s most notable scandal involved a 1985 check kiting operation that effectively provided interest-free loans by "chaining" checks across multiple banks. In early 1987, an internal investigation revealed money laundering activities connected to the Patriarca crime family at its Providence branch. Despite reporting these findings to the SEC, prosecutors moved forward toward indictment. Just prior to the stock market crash of 1987, Hutton experienced $76 million in losses due to trading activities and margin calls.

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

Following this merger, numerous Hutton brokers defected to rival firms while the combined entity shifted its strategic focus from retail investors toward large-scale corporate transactions. The Hutton name was discontinued in 1990 when American Express rebranded as Shearson Lehman Brothers. That same year, Joe Plumeri assumed the position of President & Managing Partner.

In 1992, Shearson divested its Boston Company asset management division to Mellon Financial; notably, back in December 1988, the Boston Company had revealed it had overstated earnings by $30 million.

Divestiture and spin-off

Upon assuming the role of CEO at American Express in 1993, Harvey Golub orchestrated the divestiture of Shearson's retail brokerage and asset management units to Primerica. Sanford I. Weill, the driving force behind Primerica, had previously expanded his firm, Cogan, Berlind, Weill & Levitt, into one of the nation's largest brokerage operations, which had earlier become integrated into Shearson/American Express. Following the acquisition, Shearson's operations were combined with Primerica's Smith Barney division, creating Smith Barney Shearson, and the Shearson brand was retired in 1994.

The subsequent year, 1994, saw American Express separate its remaining investment banking and institutional segments into Lehman Brothers, which ultimately filed for bankruptcy protection in 2008.

Evolution of the Shearson brand

  • Shearson Hammill & Co., 1901–1974: investment banking and brokerage firm established by Edward Shearson
  • Shearson Hayden Stone, 1974–1979: formed through the merger of Shearson, Hammill and Hayden, Stone & Co.
  • Shearson Loeb Rhoades, 1979–1981: resulting from the consolidation of Shearson Hayden Stone and 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 purchase of E.F. Hutton & Co.
  • Shearson Lehman Brothers, 1990–1993
  • Smith Barney Shearson, 1993–1994: created after sale to Primerica and merger with its Smith Barney unit before retiring the Shearson name

History of acquisitions

Key mergers and acquisitions along with predecessor entities include:

Distinguished former personnel

Related topics

References

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