Financial History Issue 132 (Winter 2020) | Page 34

Another key hire and Navy veteran
was H. Stanley Krusen, a Cornell gradu-
ate, who also joined the firm in 1946 and
was charged with creating “an investment
banking department, a new role for the bro-
kerage and commodity commission firm.”
According to the Palm Beach Post, “Within
a few years, [Krusen] established the firm
as a municipal bond underwriter and an
innovator in corporate finance. He pio-
neered the raising of capital for real estate
investment trusts.” By 1952, the firm had 12
offices across the United States, a branch in
Montreal and an agency in Switzerland.
Shearson, Hammill & Co., Inc.
In 1964, the firm incorporated and Van
Tuyl, who had been managing partner
since 1958, became president. When Van
Tuyl, was named chairman in 1966, H.
Stanley Krusen took his place. By 1970,
the firm’s leadership changed again when
Alger B. “Duke” Chapman, Jr. became
president. He replaced Krusen, who
retired from the firm. The son of a tax
attorney and Republican Party leader,
Chapman, Jr. had worked as an attorney
for the SEC. He became CEO in 1973.
During Van Tuyl and Chapman’s ten-
ures, the firm entered a new phase in
its history. According to The New York
Times, “In the late 1960s, like many
other brokerage houses, Shearson had
to retrench. A long period of pell-mell
expansion was brought to a halt both by a
rash of ‘back office’ problems that made it
extremely difficult to reconcile trades and
by a decline in trading volume that cut
into earnings.” In 1974, growing indus-
try competition, the reality of negotiated
commissions and reduced trading volume
put the firm in a very precarious state,
which was exacerbated by “the death of
two major capital partners.” According to
the Chicago Tribune, “Shearson, Hammill
& Co. was short on capital and dripping
red ink….” Rumors surfaced that Shear-
son, Hammill & Co., Inc. was planning to
merge with Hayden, Stone, Inc.
Shearson Hayden Stone, Inc.
Chapman Jr. had been approached by San-
ford “Sandy” Weill, Hayden Stone’s chair-
man, about a possible merger between the
two firms. When the deal went through,
the new firm was called Shearson, Hayden
Stone, Inc. and had a capital of $76 mil-
lion. It became “the fifth-largest firm on
Wall Street” and had a combined 1,500
salesmen, 114 offices in the United States
and 10 offices in Europe.
According to the Chicago Tribune,
“Sources said the combination succeeded
partly because Chapman’s frank discus-
sion of the situation enabled the firm to
retain key employees. ‘His people skills at
that time were as good as anyone I’ve ever
worked with in my life,’ said American
Stock Exchange Chairman Arthur Levitt,
then president of Hayden Stone.” Weill
was named chairman, Chapman was
named co-chairman and COO and Van
Tuyl was named vice chairman, though
he retired in 1975. According to the Palm
Beach Post, H. Stanley Krusen also played
a key role in the merger. Even though he
had retired from the firm, he “dedicated
$1,000,000 as permanent capital in order
to stabilize the situation” and “was instru-
mental in aiding the merger of the firm
into Hayden Stone & Company.”
After the merger, Shearson’s story became
dominated by Weill. Born in Brooklyn in
1933 to Polish Jewish immigrants, Weill was
the son of a dressmaker. He attended Peek-
skill Military Academy and graduated from
Cornell University in 1951. Weill started as a
runner for Bear Stearns in 1955 and moved
to Drexel Burnham Lambert in 1959. I.W.
Burnham, 2nd, Drexel Burnham’s chair-
man and namesake, said of Weill, “He was
one of our best salesmen. He was one of
those guys who used to stay downtown at
night making calls to customers or potential
customers on the telephone.” Soon after,
Weill decided to strike out on his own
with partners Arthur Carter, Roger Berlind,
Marshall Cogan and Arthur Levitt. Levitt
later said, “I have never known a more
focused person in my life.”
32    FINANCIAL HISTORY  |  Winter 2020  | www.MoAF.org
Hayden Stone Inc. was itself the result
of a merger between Weill’s firm, Cogan,
Berlind, Weill & Levitt, and Hayden, Stone
in 1970. Amey Stone and Mark Brewster
wrote that when CBWL bought Hayden
Stone, “Weill and his partners purchased
a firm 10 times their size.” Through the
deal, Weill created a “prototype” for future
strategy, which was: “Buy a struggling
company with a prestigious name on the
cheap, adopt its brand name, close under-
performing divisions, integrate its opera-
tions into the existing infrastructure and
slash costs.” Often, targeted firms had both
a prestigious past and a specialization in
investment banking, which was not an area
in which CBWL had a strong track record.
At a time when many firms were strug-
gling, Weill became a pioneer in the field
of mergers. Bear, Stearns & Co.’s senior
partner, Alan Greenberg, said of Shear-
son, “It’s been like a mouse attacking an
elephant.” The New York Times reported,
“Mr. Weill’s most dramatic achievement
during his stewardship has been to build
his concern into one of Wall Street’s
giants…and to do it primarily by means
of acquisitions.” Shearson Hayden Stone
continued to buy other firms, including
Lamson Bros. & Co. in 1976, Faulkner
Dawkins & Sullivan in 1977 and Reinholdt
& Gardner in January 1979. The Times
said, “Mr. Weill and his friends—parvenus
on the Wall Street scene who had bought
out three traditional Establishment names
in just four years—kept on buying.”
In 1979, Shearson Hayden Stone
merged with Loeb, Rhoades, Hornblower
& Co. becoming “the nation’s second
largest brokerage house.” Loeb Rhoades,
Hornblower & Co.’s history was itself an
example of the many mergers taking place
in the securities industry in the 1970s. It
was an amalgamation of four firms: Carl
M. Loeb Rhoades & Co., Hemphill Noyes
& Co., Hornblower & Weeks and Spencer
Trask & Co. The newly combined firm of
Shearson Loeb Rhoades was “a financial-
services giant with more than $250 million
in capital…second in size only to Merrill
Lynch & Company, which operates from a