Word: salomon
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...Justice Department and federal regulators launched investigations of the firm. Shareholders feared Salomon could even be barred from dealing in Treasury securities, a devastating penalty that could dry up most of the firm's profits. Such concerns caused the price of Salomon stock to plunge Thursday from 31 5/8 to 26 7/8. Buoyed by news of the imminent departure of Gutfreund, 61, and Strauss, 49, the stock finished the week...
...resignation of Gutfreund puts an end to one of Wall Street's most fabled careers. A gruff-talking, cigar-chomping bond trader, Gutfreund became chairman of Salomon in 1978. According to Liar's Poker, a 1989 best seller by Michael Lewis that described Salomon as a sort of financial Animal House, Gutfreund exhorted traders to come to work each morning "ready to bite the ass off a bear." When the traders were not executing centimillion-dollar deals, they delighted in such pranks as dumping garbage on one another's desks and replacing the contents of a male colleague's suitcase...
Ironically, it was a practical joke gone awry that helped bring Salomon down. In an elaborate form of hazing, Mozer reportedly persuaded a Salomon customer last February to submit a bogus $1 billion order for 30-year Treasury bonds. The idea was to shock the novice trader who received the order. But the prank backfired: the deal went through, and the unauthorized purchase landed on Salomon's books...
...Salomon rigged bids to exceed the 35% trading ceiling in at least three Treasury auctions during the past nine months. In December the firm bought 35% of an $8.5 billion, four-year-note sale and also submitted a $1 billion bid that was ostensibly for a customer but was really for its own account. The combined transactions gave Salomon a 46% share of the overall deal...
...Washington lawmakers called for tighter regulation of the $2.2 trillion government securities market. Declared Congressman Edward Markey, a Massachusetts Democrat who chairs a subcommittee that oversees Treasury bond trading: "The issue is the integrity of the most important financial marketplace in the world." Markey blamed lax regulation for permitting Salomon to display "a cavalier disregard for the rules." Democratic Senator Christopher Dodd of Connecticut demanded that Treasury Secretary Nicholas Brady conduct a "full review" of the department's auction rules. With a $300 billion federal budget deficit to finance, Washington cannot afford to scare any bond buyers away...