Citigroup Retires the Salomon Name

The once-vaunted Salomon name disappears quietly today as Citigroup Inc. officially drops the Salomon Smith Barney moniker for its investment bank.

Corporate and investment banking activities will now fall under the umbrella of the unit’s Citigroup parent, a Citigroup spokesman said. Salomon Smith Barney wealth management and equity research functions will operate under “Smith Barney,” as they have since October, when Citigroup announced the separation of the units.

And Salomon -- a name with a storied past -- will be used solely in conjunction with certain Citigroup asset management funds, the spokesman said.

Citigroup decided to drop the name -- and to separate banking from research -- to placate regulators and defuse criticism of its alleged conflicts of interest.

“Even for a crusty Wall Street veteran like myself, it’s a little sad,” said Mike Holland, chairman of investment firm Holland & Co. and a former executive at Salomon Bros. Asset Management.

In the 1980s, Salomon Bros. was a powerful player in both the debt and equity markets. Its Chairman and Chief Executive John Gutfreund was named “the King of Wall Street” in 1987 by Business Week magazine.

“[Salomon’s] reputation was built on trading, with a trading culture that was very particular to it, and it made a lot of money, but its operating results were quite volatile,” Harvard Business School professor emeritus Samuel Hayes said.

Disaster struck in 1991 when a Salomon trader was discovered to have violated Treasury auction rules, leading to the forced resignation of Gutfreund. Famed investor Warren Buffett took over, restoring the bank’s business and reputation.

In 1997, Travelers Group purchased Salomon and merged it with Smith Barney, an investment bank with aristocratic roots. Smith Barney once ran TV ads featuring actor John Houseman, whose famed line was, “We make money the old-fashioned way -- we earn it.” Travelers then merged with Citigroup.

Salomon was a key player during the telecom boom of the late 1990s. Analyst Jack Grubman was a kingmaker for many telecom start-ups and helped Salomon rake in hundreds of millions of dollars in banking fees. When the boom fizzled, critics said Grubman misled investors with favorable ratings on companies that ended up filing for bankruptcy protection.

In December, after a sweeping investigation by federal and state regulators into analyst research practices at Wall Street firms, Citigroup agreed to pay a $400-million fine. Grubman resigned and agreed to be barred from the securities industry and to pay a $15-million fine.

“The Salomon name has a good bit of cachet,” Hayes said, “and I’m surprised that they decided to drop the name.”