Word: salomons
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Though it reigned over the freewheeling government-securities market, once mighty Salomon Brothers now finds itself on terrain every bit as treacherous as Wall Street. Last week the firm's interim chief executive, Warren Buffett, was summoned along with financial regulators to Capitol Hill for the first public hearings on illegal bond-bidding practices revealed last month. Inquiring congressional committee members had nothing but praise for Buffett's efforts at reform. Beyond firing or suspending top executives, Salomon departed from past practices and decided against paying them compensation, severance or their future legal expenses. Buffett also revealed during testimony that...
After applauding Buffett for his changes, Congress focused its anger on regulators. House members, seeking a new image of toughness after being stung by the savings and loan debacle, blasted the Securities and Exchange Commission, the Treasury and the Federal Reserve for failing to detect Salomon's fraudulent bids fast enough. Congressional leaders accused regulators of being too cozy with Wall Street firms and warned that Congress would move quickly to overhaul the $2.2 trillion government-securities market to prevent similar abuses in the future...
While regulators admitted that new rules may ultimately be needed, they argued strenuously against any knee-jerk changes. The Treasury Department, anxious to regain its authority over a market it relies on to raise capital, announced that it was reopening its investigation to see if Salomon and one of its clients, Mercury Asset Management, worked together to cover up a bogus bid last February. Treasury's renewed interest may have been prompted in part by a Justice Department announcement that it was widening its probe of unauthorized bidding practices in search of violators in other Wall Street firms...
...course, any class, at any school, no matter what the safeguards, will have some cheaters. The guys at Salomon Brothers who bought too many bonds probably swapped answers in business school take-homes. This type eventually gets nailed somewhere down the line...
Scandal-plagued corporations and government agencies have a surefire formula for riding out the storm: Find someone with an unimpeachable reputation to whip the place back into shape. Beleaguered Salomon Brothers turned to superinvestor Warren Buffet. A few other high-profile "fixers...