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Encyclopedia > Salomon Brothers
Salomon Brothers
Type Subsidiary of Citigroup
Founded 1910
Headquarters New York, USA
Products Investments
This article deals with Salomon Brothers. For other uses of the name Salomon, see Salomon.

Salomon Brothers was a Wall Street investment bank. Founded in 1910, it remained a partnership until the early 1980s, when it was acquired by the commodity trading firm then known as Phibro Corporation. This proved a "wag the dog" type merger as the parent company became first Phibro-Salomon and then Salomon Inc. and the commodity operations were sold. Eventually Salomon was acquired by Travelers Group (now Citigroup) in 1998. Citigroup Inc. ... 1910 (MCMX) was a common year starting on Saturday (link will display calendar) of the Gregorian calendar or a common year starting on Sunday of the 13-day slower Julian calendar. ... Investment is a term with several closely related meanings in finance and economics. ... Headline text Headline text link titleLink titleItalic textBold text--128. ... Elaborate marble facade of NYSE as seen from the intersection of Broad and Wall Streets For other uses, see Wall Street (disambiguation). ... To meet Wikipedias quality standards, this article or section may require cleanup. ... 1910 (MCMX) was a common year starting on Saturday (link will display calendar) of the Gregorian calendar or a common year starting on Sunday of the 13-day slower Julian calendar. ... A partnership is a type of business entity in which partners share with each other the profits or losses of the business undertaking in which all have invested. ... This article cites very few or no references or sources. ... Citigroup Inc. ... Citigroup Inc. ... Year 1998 (MCMXCVIII) was a common year starting on Thursday (link will display full 1998 Gregorian calendar). ...


It eventually became the largest issuer and trader of bonds in the United States, its PR man defining a liquid bond as any bond traded by Salomon Brothers. Salomon was always considered second-rate in the prestigious business of mergers and acquisitions, however.


During its time of greatest prominence in the 1980s, Salomon became noted for its innovation in the bond market, creating the first mortgage-backed security. 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). This article cites very few or no references or sources. ... In finance, a bond is a debt security, in which the issuer owes the holders a debt and is obliged to repay the principal and interest (the coupon) at a later date, termed maturity. ... A mortgage-backed security (MBS) is an asset-backed security whose cash flows are backed by the principal and interest payments of a set of mortgages. ... The capital market (securities markets) is the market for securities, where companies and the government can raise long-term funds. ... This article or section cites very few or no references or sources. ... This article does not cite its references or sources. ... In finance options are types of derivative contracts, including call options and put options, where the future payoffs to the buyer and seller of the contract are determined by the price of another security, such as a common stock. ...


Salomon had an expertise in fixed income trading, betting large amounts of money on certain swings in the bond market on a daily basis. The top bond traders called themselves "Big Swinging Dicks", and were the inspiration for the books The Bonfire of the Vanities and Liar's Poker. This article or section does not cite any references or sources. ... The bond market, also known as the debit, credit, or fixed income market, is a financial market where participants buy and sell debt securities usually in the form of bonds. ... To meet Wikipedias quality standards, this article or section may require cleanup. ... Liars poker is a bar game that combines statistical reasoning with bluffing, and is played with the eight-digit serial number on a dollar bill. ...


During this period however the performance of the firm was not to the satisfaction of its upper management. The amount of money being made relative to the amount being invested in all the markets Salomon was in, was small, and the company's traders were paid in a flawed way which was disconnected from their true profitability (fully accounting for both the amount of money they used and the risk they took). There were debates as to which direction the firm should head in, whether it should prune down its activities to focus on certain areas. For example, the commercial paper business (providing short term day to day financing for large companies), was apparently unprofitable, although some in the firm argued that it was a good activity because it kept the company in constant contact with other businesses key financial personnel. It was decided that the firm should try to imitate Drexel Burnham Lambert, using its Investment Bankers and its own money to urge companies to restructure or engage in leveraged buyouts which would result in financing business for Salomon Brothers. The first moves in this direction were for the firm to compete on the leveraged buyout of RJR Nabisco, followed by the leveraged buyout of Revco stores (which ended in failure). Commercial paper is a money market security issued by large banks and corporations. ... Drexel Burnham Lambert was one of the most profitable Wall Street investment banking firms during the late 1970s and most of the 1980s. ...


Treasury Bond Scandal

In 1991, Salomon was caught submitting false bids to the U.S. Treasury by Deputy Assistant Secretary Mike Basham, in an attempt to purchase more Treasury bonds than permitted by one buyer between December 1990 and May 1991. It was fined 290 million dollars, the largest fine ever levied on an investment bank at the time, weakening it and eventually leading to its acquisition by Travelers Group. The scandal is covered extensively in the book Nightmare on Wallstreet. 1991 (MCMXCI) was a common year starting on Tuesday of the Gregorian calendar. ... The United States Department of the Treasury is a Cabinet department, a treasury, of the United States government established by an Act of U.S. Congress in 1789 to manage the revenue of the United States government. ... MCMXC redirects here; for the Enigma album, see MCMXC a. ...


After the acquisition, the parent company (Travelers Group, and later Citigroup) proved culturally averse to the volatile profits and losses caused by proprietary trading, instead preferring more slow and steady growth. Salomon suffered a $100 million dollar loss when it incorrectly bet that MCI Communications would merge with Sprint instead of Worldcom. Subsequently, most of its proprietary trading business was disbanded. MCIs original corporate logo MCI Communications was an American telecommunications company that was instrumental in legal and regulatory changes that led to the breakup of the AT&T monopoly of American telephony. ... Sprint Nextel Corporation (NYSE: S), headquartered in Reston, Virginia, is one of the largest telecommunications companies in the United States. ... For a time, WorldCom (WCOM) was the United States second largest long distance phone company (AT&T was the largest). ...


For some time after the mergers the combined investment banking operations were known as Salomon Smith Barney, but reorganization has renamed this entity as Citigroup Global Markets Inc. The Salomon Brothers name, like the Smith Barney name, is now a division and service mark of Citigroup Global Markets. This article needs to be cleaned up to conform to a higher standard of quality. ...


References

Robert Sobel in a promotional photo for his publisher. ...

External links


  Results from FactBites:
 
FindLaw - Purchase Agreement - AmeriCredit Corp. and Salomon Brothers Inc. (2278 words)
FindLaw - Purchase Agreement - AmeriCredit Corp. and Salomon Brothers Inc.
Use the Thomson Legal Record to access a lawyer's litigation record!
SALOMON BROTHERS INC CREDIT SUISSE FIRST BOSTON CORPORATION BY: SALOMON BROTHERS INC By ------------------------------- NAME: TITLE SCHEDULE I AMERICREDIT CORP. Principal Amount Initial Purchaser of Notes ----------------- -------- Salomon Brothers Inc..........................................
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