Maughan did not return calls, but Dimon said the two decided early on in the merger negotiations to share the chief executive title, both for symbolic and practical reasons. Maughan, 49, a former official of Britain's treasury who was a star institutional salesman at Salomon and ran the firm's Tokyo operations before coming to New York in 1991 to run the whole firm at Buffett's behest. We have to execute this well."ĭimon, 41, will share the CEO spot with Deryck C. "This gives us a chance to be one of the top firms on a global basis," he said in an interview today. James Dimon, who runs Smith Barney and will now be co-chief executive of the combined unit of Travelers Group, acknowledged that blending the two cultures will be key to the deal's success. Greenhill left soon after he arrived, although he has an employment contract that gives him a share of the investment bank's profits through 1998. Smith Barney's previous attempt to break into the big leagues of investment banking caused it much embarrassment - and a lot of money - when it hired dealmaker Robert Greenhill, then a top executive at Morgan Stanley, and a team with lavish contracts that made many of the other Smith Barney employees feel like second-class citizens. in number - but has always lacked the clout in investment banking to deliver to those retail clients the best deals available. The firm has 11,000 brokers - second only to Merrill Lynch & Co. Smith Barney, by contrast, has focused more on its retail roots and on trading stocks for customers. The trading culture is still deeply engrained, officials there said. It commits nearly half its equity capital to support an elite operation of trading bonds and exotic global financial instruments for its own account. Buffett quickly backed down, and those who remained at Salomon worked hard to rebuild key businesses.Īlthough perhaps a bit more humble these days, Salomon still takes more than its share of risks. When Buffett and his team of managers tried to rein in the astronomical pay packages enjoyed by Salomon's senior bankers and traders, many left the firm for competitors eager to have them. Buffett came in for a year as chairman to run the place and clean up the abuses. Its top four officials were ousted and investor Warren E. Treasury in a series of government bond auctions, a core business for the firm. The firm changed abruptly in 1991 with its near-death experience after it was caught brashly lying to the U.S. It prided itself on being the roughest, most powerful place on the Street. Salomon Brothers was born a trading firm, and just a decade ago it was thought to be the best in the business. and will merge it with its wholly owned Smith Barney unit. He didn't have as high hopes for Wall Street's newest wonder: Salomon Smith Barney, created today when Travelers Group Inc. "Seamless" is how one competitor today described the execution of that merger. back in February, the naysayers were quick to predict turmoil when egomaniac, patrician bankers demoralized their plebeian retail broker peers. announced it was merging with a dowdy - but very profitable - Dean Witter, Discover & Co. The poor figures were largely the result of $700 million-worth of trading losses, mostly from proprietary bond trading.When elite investment bank Morgan, Stanley & Co. It made a net loss of $325 million, compared with a pro-forma profit of $508 million in the third quarter of 1997. Travelers' next merger - with Citicorp - came on the heels of disastrous third-quarter earnings at its Salomon Smith Barney investment banking unit. Given Salomon's historical dependence on proprietary trading and the type of bond arbitrage that almost destroyed the firm run by ex-Salomon traders - Long-Term Capital Management - "Salomon would probably have been bankrupt by then," says one who left almost as soon as the 1997 merger with Travelers Group (which owned retail brokerage Smith Barney) was announced.īy the end of October, however, Maughan wasn't sitting so pretty. "He seemed tickled pink that he had sold the firm a year earlier," says David Berry, an analyst at Keefe Bruyette & Woods, recalling a conversation with Maughan.įormer Salomon bankers say they know why Maughan was so happy. As the markets began to crumble around Wall Street executives in late August, former Salomon Brothers chairman and chief executive officer Deryck Maughan was in a good mood.
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