Lewis went to great lengths to point out that Salomon Brothers made tons of money simply by being the only Wall Street firm involved in what was considered an unfashionable market (mortgage bonds) in the early 1980s. They could successfully bid 85 cents on the dollar for mortgages that weren't attracting any attention from investors, then watch those mortgages get paid off at full value in a very short time frame due to default by the borrower or some other reason for prepayments (e.g., condo conversions for apartment buildings).
RE: Salomon Brothers
Corporate Cowboys these bunch of people are.
Salomon was a partnership until the early 1980s, when it was acquired by the commodity trading firm then known as Phibro Corporation.
This proved a “wag the dog” type merger as the parent company became first Phibro-Salomon and then Salomon Inc.
Salomon trader Paul Mozer was caught submitting false bids to the U.S. Treasury, in an attempt to purchase more Treasury bonds than permitted by one buyer between December 1990 and May 1991.
Salomon was fined $290 million, the largest fine ever levied on an investment bank at the time, weakening it and eventually leading to its acquisition by Travelers Group
Eventually Salomon was acquired by Travelers Group in 1998, and following the latter’s merger with Citicorp that same year, Salomon became part of Citigroup.
Although the Salomon name carried on as Salomon Smith Barney, which were the investment banking operations of Citigroup, the name was ultimately abandoned in October 2003 after a series of financial scandals that tarnished the bank’s reputation.
Of course Citigroup eventually had to be RESCUED by the tax payers as a result of their involvement in the subprime debacle.
Anything new ??
Exactly! The taxpayer can't be ripped off unless the government has provided the avenue for it.