Citigroup: The last days of Salomon Brothers

As the markets began to crumble around Wall Street executives in late August, former Salomon Brothers chairman and chief executive officer Deryck Maughan was in a good mood. “He seemed tickled pink that he had sold the firm a year earlier,” says David Berry, an analyst at Keefe Bruyette & Woods, recalling a conversation with Maughan.

Former Salomon bankers say they know why Maughan was so happy. Given Salomon’s historical dependence on proprietary trading and the type of bond arbitrage that almost destroyed the firm run by ex-Salomon traders – Long-Term Capital Management – “Salomon would probably have been bankrupt by then,” says one who left almost as soon as the 1997 merger with Travelers Group (which owned retail brokerage Smith Barney) was announced.