New Leadership

That path was changed by the 1951 death of his uncle Herbert, who was succeeded as senior partner by a longtime employee, Rudolf Smutny.

According to Charles Geisst’s 2001 book, “The Last Partnerships,” Smutny soon fell out of favor for making ill- advised investments and indulging “in what was becoming the traditional Wall Street vice of an outlandish expense account and all the visible perks of his position as the managing partner.”

Smutny resigned in 1957 and was succeeded not by another senior partner but by a committee that included Salomon and Levy, who decades earlier had been the firm’s first employee.

Over the next six years, Salomon earned his stripes by building the firm’s pool of capital, which had taken a $4 million hit when Smutny left.

Compensation Plan

He persuaded senior partners to stop withdrawing capital and instead move to a salary system -- $25,000 annually, according to Sobel, plus 5 percent interest on their capital share, funds for charitable gifts and $6,000 for each dependent. This put the firm “on the road to stability in what was becoming the biggest bull market yet seen,” Geisst wrote.

As part of the Fearsome Foursome, Salomon made inroads as an underwriter, first by bidding for business from utilities companies. According to Sobel, the amount of underwritings managed by Salomon Brothers was $276 million in 1962, $578 million in 1963 and $873 million in 1964.

In November 1963, Salomon, was named managing partner.

He steered the firm into buying exceptionally large blocks of stock from a bank or pension fund and selling it in whole or pieces to other institutional investors. Such block trading required daring, because the firm would own the shares for a time while looking for buyers.

Many trading houses considered that too risky. Not Salomon, who summarized his attitude with three words: “We’ll buy anything.”

Personal Integrity

In one example cited by Time magazine in 1970, the firm’s partner in charge of block trading, Jay H. Perry, bought almost 1.2 million shares of Goodyear Tire & Rubber -- the largest block ever traded on the New York Stock Exchange -- after Goodyear reported a decline in earnings. Within an hour, the firm had sold all the shares at a profit -- while earning $300,000 in brokerage fees from buyers and sellers.