Kidder, Peabody & Co. was an American securities firm, established in Massachusetts in 1865. The company's operations included investment banking, brokerage, and trading.
The firm was sold to General Electric in 1986. Following heavy losses, it was subsequently sold to PaineWebber in 1994. After the acquisition by PaineWebber, the Kidder Peabody name was dropped, ending the firm's 130-year presence on Wall Street. In November 2000, PaineWebber itself was merged with UBS AG.
Video Kidder, Peabody & Co.
History
Early history
Kidder, Peabody & Co. was established in April 1865 by Henry P. Kidder, Francis H. Peabody, and Oliver W. Peabody. The firm was formed via reorganization of its predecessor company, J.E. Thayer & Brother, where the three founders had previously worked as clerks.
Kidder, Peabody acted as a commercial bank, investment bank, and merchant bank. The firm had an active securities business, dealing in treasury bonds and municipal bonds, as well as corporate bonds and stocks. Kidder Peabody also actively traded and invested in securities for its own account.
In the aftermath of the 1929 stock market crash, Kidder Peabody was in a perilous situation. In 1931, Albert H. Gordon bought the struggling firm with financial backing from Stone & Webster. Since electric utilities were considered somewhat risky, Stone & Webster set up its own investment banking operation to finance their own projects through bond sales. Many of the utilities were municipally owned and Stone & Webster's investment banking unit served them in other offerings. Eventually, as fewer investment banking clients were engineering clients, there was an incentive to divest and merge the unit with another investment bank. Edwin Webster's father, Frank G. Webster, was a Senior Partner of Kidder Peabody, and Kidder had actively supported Charles A. Stone and Edwin as they started The Massachusetts Electrical Engineering Company, which later became Stone & Webster, in the 1890s. Gordon helped rebuild Kidder Peabody by focusing on specific niche markets including utility finance and municipal bonds. Stone & Webster had thus become an integrated company which designed utility projects, built them, financed them, and operated them for municipalities.
In 1967, Kidder Peabody helped to arrange a deal whereby the USDA's Commodity Credit Corporation invested $21.8 million in the failing Lebanese Intra Bank, a cornerstone of the Lebanese banking industry. This move likely contributed to preventing a major financial crisis in Lebanon from worsening.
In the 70s, R&D and finance
Kidder Peabody was among the first Wall street firms to start and dedicate an entire department to financial research and development. In the Late 1970s, it hired Yale Professor John Geanakoplos to start an R&D department to research and analyse the connection between finance and mathematics. Gradually the department grew to contain 75 prominent academics, and continued to function till Kidder Peabody's closure.
Kidder and the 1980s insider trading scandal
Gordon served as Kidder's chairman until selling it to General Electric in 1986. Soon after the GE purchase, a skein of insider trading scandals, which came to define the Street of the 1980s and were depicted in the James B. Stewart bestseller Den of Thieves, swept Wall Street. The firm was implicated when former Kidder Peabody executive and merger specialist Martin Siegel--who had since become head of mergers and acquisitions at Drexel Burnham Lambert--admitted to trading on inside information. Siegel also implicated Richard Wigton, Kidder's chief arbitrageur. Wigton was the only executive handcuffed in his office as part of the trading scandal, an act that was later depicted in the movie Wall Street.
With Rudy Giuliani, then the United States Attorney for the Southern District of New York, threatening to indict the firm, GE conducted an internal investigation concluding that Kidder executives had not done enough to prevent the improper sharing of information. In response, GE fired Kidder chairman Ralph DeNunzio and two other senior executives and stopped trading for its own account.
1994 bond trading scandal
Kidder Peabody was later involved in a trading scandal related to false profits booked over the course of 1990-1994. Joseph Jett, a trader on the government bond desk, was found to have systematically exploited a flaw in Kidder's computer systems, generating large false profits. When the fraud was discovered, it was determined that Jett had lost 75 million dollars over the four years instead of the apparent profit of 275 million dollars over the same period. The SEC later concluded Jett had committed securities fraud and banned him from the industry.
In the rush of bad press coverage following the disclosure of the overstated profits, General Electric sold Kidder Peabody's assets to PaineWebber for $670 million in October 1994, closing the transaction in January 1995.
September 11, 2001 terrorist attacks
On September 11, the former offices of Kidder Peabody (which were occupied by PaineWebber, as they had assumed the lease as part of the acquisition in 1994) were among many businesses impacted by the terrorist attacks. The company had offices on the 101st Floor of One World Trade Center, also known as the North Tower. Two PaineWebber employees lost their lives.
Maps Kidder, Peabody & Co.
Associated people
- Prince Abbas Hilmi, Vice President of Kidder, Peabody & Co. / Executive Director of Kidder, Peabody International Investments (1986-1989)
- Lloyd B. Waring, Vice President of Kidder, Peabody & Co.
- Lana Del Rey's paternal grandfather, Robert England Grant, Sr. (Brown '48, Harvard MBA '50) was a Kidder, Peabody & Co. investment banker, later vice president at Plough, Inc and Textron, and venture capitalist.
- Christian Gerhartsreiter, serial imposter, was briefly employed at Kidder, Peabody & Co. under the alias "Christopher C. Crowe" in the late 1980s.
See also
- General Electric
- Paine Webber
- Martin A. Siegel
- Joseph Jett
References
External links
- Kidder, Peabody & Company Records at Baker Library Special Collections, Harvard Business School
Source of article : Wikipedia
0 Comments