A Wall Street fortress for most of the twentieth century, Salomon Brothers fell from grace when it found itself tangled in a chain of scandals in the early 1990s, which led to the firm's emergency takeover by Warren Buffett and eventual integration into Citigroup.
While Salomon's infamously reckless behavior is now a thing of the past, what remains today is a cult-like loyalty to the firm and, of course, a great story.
By—you guessed it—brothers Arthur, Herbert and Percy Salomon.
The brothers began with $5,000 and some help from their father's (a broker himself) clerk and opened their first money brokerage office on Broadway near Wall Street.
By remaining bearish in the years leading up to the Great Depression, Salomon Brothers was able to weather the market crash of 1929, its largest struggles between family members as to whom should take over the business.
The firm continued to grow in the following decades
Under the leadership of the family's golden boy heir—William (Billy) Salomon—the firm expanded its operations in the 1960s, adding a research department (hiring the infamous Henry Kaufman a.k.a. Dr. Gloom) and growing its block trading and underwriting activities.
By the end of the 1960s, Salomon joined Lehman Brothers, Blythe, and Merril Lynch to become the 'Fearsome Foursome.'
Trader Paul Mozer submitted illegal bids for U.S. treasury securities in August of 1990, attempting to corner the market by purchasing more than the 35% share allowed per individual transaction
Mozer's supervisor, John Meriwether, chastised the bid when it came to his attention, but let Mozer stick around
Warren Buffett had invested $700 million in Salomon Brothers in 1987 and proved to be the best choice for assuming the position of chairman in the 9-months following Gutfreund's forced resignation.
Buffett didn't like spending time away from Berkshire Hathaway and sent his investors a letter saying his new position was "far from fun."
"Lose money for the firm and I will be understanding, lose a shred of reputation for the firm and I will be ruthless" said Buffett in a 1991 hearing in front of the House committee on Energy & Commerce.
Gutfreund wasn't the only senior official to leave
In fact, John Meriwether (former vice-chairman of Salomon) and Myron Scholes (co-head of Salomon's fixed-income derivative group) went on to start Long-term Capital Management.
We know how that turned out.
(If you don't, you can read about their $4.6 billion loss in Roger Lowenstein's 'When Genius Failed')
Source: When Genius Failed
After Buffett left Salomon, things were never really the same
Salomon was acquired by Travelers in 1997 for $9 billion (Buffet walked away with $1.7 billion).
Travelers and Salomon never really saw eye-to-eye on the way Salomon conducted business, leaving Travelers to disband most of Salomon's infamously volatile trading activity shortly after the acquisition.
While Salomon now lives deep within the Citigroup empire, there's still a curious loyalty to the former Wall Street giant. According to the Wall Street Journal, investors (as late as 2009) would call Citi and ask for "Salomon."
