Financial History Issue 132 (Winter 2020) | Page 35

Certificate for three shares in the American Express Company, 1865.
capital base of $720 million…” The Times
called it a “blockbuster.”
Shearson Loeb Rhoades
Contemporary and historic accounts of
Shearson’s acquisitions often speak of the
differences in social standing between
Weill and his targeted firms. Weill’s firm,
whose history dated back only to 1960, was
considered a parvenu and upstart. Accord-
ing to the Wall Street Journal, when Weill
and Shearson, Hammill’s Duke Chapman
met secretly in Manhattan’s Little Italy
to discuss the merger between their two
firms, “Mr. Chapman, considered a mem-
ber of the Wall Street establishment, later
told Wall Street Journal reporter Monica
Langley in her book, Tearing Down the
Walls, that he was surprised to find he and
Mr. Weill got along.”
When Weill’s firm merged with Loeb
Rhoades, Hornblower & Co., The New
York Times said, “On status-conscious
Wall Street, Mr. Loeb is Old Guard and
Mr. Weill is New Breed.” Given the dif-
ference in prestige, The Times asked, why
would Loeb Rhoades want to merge with
Shearson? Capital, they said. “Mr. Loeb
wants to preserve his capital and Mr. Weill
is anxious to acquire more permanent
capital for his firm.”
In 1981, the concern for capital led Weill
to pitch the sale of Shearson Loeb Rhoades
to the American Express Company, which
was at the time a $21 billion company. That
year, American Express bought Shearson
Loeb Rhoades and the firm became Shear-
son American Express. Unfortunately, it
was a deal that Weill came to regret.
Shearson American Express
American Express was founded in 1850
as a merger between Butterfield, Wasson
& Co., Livingston, Fargo & Co. (previ-
ously Western Express) and Wells & Co.
(previously Livingston Wells & Co.). Its
three founders were Henry Wells, Wil-
liam G. Fargo and John Butterfield. Wells,
Fargo—an off-shoot of the firm—was
founded in 1852 “to provide express and
banking services in California.”
American Express diversified in the
1960s under Howard L. Clark, who became
president and CEO in 1960, expanding its
services in finance and travel. During this
time, the firm’s credit card business grew,
but Clark’s plan to diversify American
Express was not without its problems. In
1962, the firm became involved in what
became known as the salad oil scandal
when its subsidiary American Express
Field Warehousing Co. was swindled by
a food-oil trader named Anthony DeAn-
gelis. This cost the firm about $60 million
to settle. It was, at the time, “the biggest
commodities scandal in history.”
Like Weill, American Express made a
number of purchases in its quest to diver-
sify. It bought W.H. Morton & Co. in 1966,
as well as the Fireman’s Fund Insurance
Co. and Equitable Securities Corporation
in 1968. The combined firm became Equi-
table Securities, W.H. Morton that year.
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