Financial History Issue 130 (Summer 2019) | Page 38

Certificate for 30 shares in the North Butte Mining Company owned by Paine, Webber & Co., February 27, 1923. merging two years later in 1982 with Con- necticut General Corporation, another prominent insurance company founded in 1865. The company was renamed Cigna. That year, Cigna divested itself of most of its stake in Paine Webber Inc. By merging with Blyth Eastman Dil- lon, Davant had hoped to put “Paine Webber on par with the biggest Wall Street players.” Unfortunately, the merger did not end well and “proved his undo- ing.” Paine Webber experienced “massive operational problems” that stemmed from issues in reconciling Blyth Eastman Dillon and Paine Webber’s processing systems. In an episode reminiscent of the back office debacle of the 1960s, “the acqui- sition, which coincided with an explo- sion in stock market volume, overloaded the company’s operating systems. Many transactions were lost, and the company, after suspending bond and over-the-coun- ter trading, reported big losses in what should have been a highly profitable year.” These problems not only led to a SEC cen- sure, it led to significant financial losses, and key officials left the firm. Davant stepped down as chief executive of Paine Webber, Inc., the holding com- pany created in 1974, in 1980 and as chair- man in 1981. When he left, he told reporters, “Frankly, you get tired after 16 years in this job.” Davant’s replacement was Donald B. Marron, a New York native and graduate of the City University of New York, who had joined Paine Webber Inc. after selling “his former firm, Mitchell Hutchins [an institutional equity research firm], to Paine Webber in 1977.” When Paine Webber Inc. hired Marron, it was “seeking to bolster its reputation in investment banking, public finance and international securities.” Mar- ron became head of the firm, which merged with his investment banking firm, D.B. Marron & Co., in 1965. Michael J. Johnston, a University of Kansas and Harvard Business School grad- uate, who started at Mitchell Hutchins in 36    FINANCIAL HISTORY  |  Summer 2019  | www.MoAF.org 1967 and followed Marron to Paine Web- ber, became president and chief operating officer of the Blyth Eastman Paine Web- ber Inc. subsidiary. Johnston also became chairman of the Paine Webber Mitchell Hutchins subsidiary. Under Marron’s leadership as chair- man and CEO, the firm responded to the operational crisis by cleaning “up its back office and [cutting] expenses by chop- ping its work force by hundreds.” Under Marron’s tenure, Paine Webber contin- ued to expand and diversify. In 1983, it bought Rotan Mosle Financial Corpora- tion, a Southwest securities firm, and First Mid-America, a securities firm located in Nebraska. In 1984, it bought Becker Pari- bas Futures, a commodity-futures trad- ing firm, and Rouse Real Estate Finance, a mortgage financing firm. That year, it also combined its subsidiaries, Paine, Webber, Jackson & Curtis, Paine Web- ber Mitchell Hutchins and Blyth East- man Paine Webber into one subsidiary