Financial History Issue 132 (Winter 2020) | Page 36
When American Express bought Shearson,
Loeb Rhoades, the new Shearson Ameri-
can Express became “an independently
operated subsidiary” and continued to buy
other firms. In 1982, it bought Robinson
Humphrey Co. and Foster & Marshall,
among others. In July 1983, it bought Davis,
Skaggs & Co., a San Francisco brokerage
house, and in 1984 it bought Investors
Diversified Services from Alleghany Corp.
Amid these changes, Weill was named
president of the parent company in 1983.
The following year, Shearson American
Express changed its name again when it
bought Lehman Brothers, Kuhn Loeb, a
prestigious firm with 19th century roots.
Shearson Lehman/American Express
Lehman Brothers, Kuhn Loeb was itself
the result of a 1977 merger between two
historic firms, Lehman Brothers and
Kuhn, Loeb & Co. Weill had actually
approached Kuhn, Loeb about buying the
firm in 1977, but Kuhn, Loeb turned him
down. Similar to Weill’s initial reception
by Hayden Stone and then Loeb Rhoades,
Kuhn Loeb saw any merger with Weill’s
firm, then Shearson Hayden Stone, “as a
clash of cultures.”
As Stone and Brewster stated, Weill was
distinctly “New Crowd,” meaning “the
sons of working-or-middle class Eastern
European Jewish families headed by a
typically self-employed father, while the
Kuhn, Loebs were “Our Crowd,” the tradi-
tional German Jewish elite. Instead Kuhn,
Loeb chose to merge with Lehman Broth-
ers, a firm with a similar pedigree, and
they seemed to have a successful partner-
ship. But shortly after, the firm ran into
trouble, starting at the top. In 1983, the
firm’s co-chief executives, Peter G. Peter-
son, the former Secretary of Commerce
under Richard Nixon, and Lewis Glucks-
man, an expert on commercial paper and
corporate finance, engaged in “an internal
power struggle” and Peterson was ousted
from the firm.
At that time, Shearson/American
Express’s chairman and CEO was Peter A.
Cohen, who was Weill’s protégé. Cohen
began working with Weill in 1971, became
his personal assistant in 1973, stayed at
Shearson Hayden Stone until 1978 and
then returned to Shearson in 1979. In
1982, Cohen became vice chairman and
COO of Shearson/American Express, and
in 1983 he became chairman and CEO
of the unit when Weill became president
of American Express, Shearson’s parent
company. Cohen was neighbors with Ste-
phen A. Schwarzman, who had become
a partner at Lehman Brothers in 1972. In
the summer of 1984, the story goes that
Schwarzman was jogging and went over
to Cohen’s house to talk to him about
merging Shearson/American Express and
Lehman Brothers, Kuhn Loeb.
Buying Lehman Brothers, Kuhn Loeb
was a major coup and established Shearson
as a power player on Wall Street. Accord-
ing to The New York Times, “The acquisi-
tion, the latest in American Express’s drive
to expand its financial services operations,
[lifted] Shearson from third place among
securities firms to second, behind Merrill
Lynch & Company and ahead of Salo-
mon Brothers Inc. in terms of total capi-
tal.” Cohen became chairman and CEO of
the new firm, which was renamed Shear-
son Lehman/American Express. Lewis L.
Gluckman, who was the chairman and CEO
of Lehman Brothers, and Robert S. Rubin,
who was the president of Lehman Brothers,
became consultants to American Express.
Weill did not stay long, however, to
enjoy Shearson’s success. In 1985, after
clashing with James Robinson III, Ameri-
can Express’s CEO, he decided to leave the
company. The New York Times reported,
“the corporate culture of American
Express and the maverick mentality of
Mr. Weill did not mesh.”
Shearson Lehman Hutton
Even without Weill, Shearson Lehman/
American Express continued its merger
trend. In 1988, the year after the firm went
public, Shearson announced that it was
going to buy the firm of E.F. Hutton & Co.
34 FINANCIAL HISTORY | Winter 2020 | www.MoAF.org
The firm had approached Hutton about a
merger, which was rejected. After the stock
market crash in 1987, Hutton changed its
mind. In 1988, the firm became Shearson/
Lehman Hutton Inc., though the Hutton
name was dropped in 1990.
In 1992, Fortune reported that Ameri-
can Express had a “boardroom coup”
led by board member Rawleigh Warner,
Jr., the former chairman of Mobil, and
Robinson was removed as CEO. Warner
and the firm denied the story. Robinson
had been chairman and CEO since 1977. A
Harvard graduate and the son of a banker,
Robinson “led American Express with a
style emblematic of the 1980s, when Wall
Street’s financiers and corporate chiefs
recognized no limits to their ambitions.”
Problems at the Shearson Lehman divi-
sion and other subsidiaries and losses on
the American Express Optima card led to
a crisis of faith in Robinson’s leadership
by the early ’90s. When he was ousted,
“the company’s stock rallied to a 52-week
high.” According to The New York Times,
Robinson was “the latest victim of a new
militancy among major shareholders and
board members that has also contributed
to the downfall of top executives at General
Motors and…at Westinghouse and IBM.”
Robinson’s successor was Harvey
Golub, who was at the time the president
of American Express. Weill had hired
Golub, previously at McKinsey & Co., in
1984. Like Weill, Golub was a Brooklyn
native, though he had grown up in Long
Island. After Golub was named chairman
and CEO of American Express, he was
able to turn the firm around. In contrast
to the diversification that the firm had
sought since the 1960s, Golub divested
the company’s “non-core business” and
re-established American Express’s place in
the credit card industry. One of the firms
he shed was Shearson Lehman.
The Return of Sandy Weill
The year after Weill left American Express
in 1985, he had become CEO of Commer-
cial Credit, a Baltimore-based consumer