Money Archives

The 1980s Savings and Loan Crisis: An Investor’s Solution

What was the 1980s savings and loan crisis? How did Salomon Brothers and Lewis Ranieri navigate this crisis? Right on the cusp of the 1980s, the savings and loan industry suffered a shock that threatened to stop the housing market in its tracks. In Liar’s Poker, Michael Lewis says that instead of backing out of the mortgage bond business, Salomon Brothers dove head-first into the market, turning the US government’s plan to bail out local banks into a way to funnel money to itself. Continue reading to learn more about how the investment bank took advantage of the savings and

How Collateralized Mortgage Obligations Exposed Shady Banks

What are Collateralized Mortgage Obligations (CMOs)? How did CMOs defuse the mortgage bond market? During the height of the mortgage bond market, Lewis Ranieri started convincing banks to trade their bonds more frequently, allowing himself and Salomon Brothers to skim profits off every transaction. That was until CMOs came along. Discover more about the fall of the mortgage bond market.

How Junk-Rated Bonds Made Salomon Brothers a Target

What are junk-rated bonds? How did junk bonds become popular on Wall Street? After mortgage bonds began to decline on Wall Street, junk-rated bonds were next on the market. But unlike how Salomon Brothers took advantage of mortgage bonds to make a penny, junk bonds would be used against the investment bank. Find out how junk-rated bonds ended up hurting Salomon Brothers.

What Is an LBO? The Takeover of a Company, Explained

What is an LBO? Are LBOs considered hostile in the business industry? A leveraged buyout (LBO) is when a group of executives makes a company private by buying all of the company’s stock. There’s still much debate on whether a leveraged buy-out is considered a hostile takeover of a company. Read more about LBOs, according to Barbarians at the Gate by Bryan Burrough and John Helyar.

Jim Simons and Mathematics: A Passion-Turned-Career

Where did Jim Simons’s love for mathematics come from? How did he turn his childhood passion into a groundbreaking career? For Jim Simons, mathematics is everything. According to The Man Who Solved the Market by Gregory Zuckerman, Simons thought equations and theorems would be the answer to the universe’s biggest mysteries. Keep reading to learn more about Simons’s passion for mathematics.

The Rescue of Salomon Brothers: Warren Buffett’s Plan

How did Warren Buffett help Salomon Brothers out of a hostile takeover? Why was the investment bank in danger to begin with? In 1987, Ron Perelman and Michael Milken conspired together to take over Salomon Brothers at its most vulnerable time. But with a large loan provided by Warren Buffett, Salomon Brothers managed to avoid the nasty bid. Keep reading to learn more about the heroic rescue by Warren Buffett and Salomon Brothers’ swift recovery.

RJR Nabisco’s LBO: Why Ross Johnson Caved In

Why was Ross Johnson resistant to a leveraged buyout of RJR Nabisco? Why did he eventually cave in? In the 1980s, many LBO consultants were pursuing the idea of buying out RJR Nabisco, but CEO Ross Johnson was hesitant. Eventually, he agreed to try an LBO, which would later become the biggest in history. Learn more about RJR Nabisco’s LBO below.

Breaking Down Biden’s SAVE Program

What is the SAVE program? Who will it affect? How do you know if you’re eligible? More than 43 million US students leave college with federal student loan debt—a crushing burden that forces many to forego buying homes and delay key life milestones like having children. President Joe Biden’s income-driven student loan repayment program, SAVE, aims to bring borrowers relief. Here’s a look at the SAVE program, and whether or not you may qualify.

What It Was Like Being a Bond Trader for Salomon Brothers

How hard was it being a bond trader in the 1980s? How did Salomon Brothers take over Wall Street? Salomon Brothers investment bank was founded in 1910 by Arthur, Herbert, and Percy Salomon. It wasn’t until the 1980s that the firm found its niche within the growing bond market. Keep reading to learn how the Salomon Brothers controlled the bond market, according to Liar’s Poker by Michael Lewis.

The Largest LBO in History: The RJR Nabisco Controversy

What was the largest LBO in history? What did Ross Johnson do after selling RJR Nabisco? In 1986, the financial company Kravis bought RJR Nabisco for an astounding $25 billion. This makes the acquisition the largest LBO to date and sent CEO Ross Johnson into full retirement. Continue reading to learn more about Kravis’s final offer for RJR Nabisco.