Case | HBS Case Collection | March 1992 (Revised December 1992)

Salomon and the Treasury Securities Auction

by Dwight B. Crane

Abstract

Set in June 1991, two months prior to Salomon Brothers' announcement that the firm had violated the Treasury Department's rules governing the auctions of new Treasury securities. Salomon Vice Chairman John Meriwether must decide how to address problems that continue to appear in the management of the firm's government bond trading activities. In April 1991, one of his managers admitted that he had submitted an illegal auction bid in February 1991. Now, one month later, there is mounting speculation in the press that Salomon tried to corner the market for May 2-year notes. Structured to allow students to analyze the ethical, legal and managerial dimensions of John Meriwether's situation. Background information about the history of Salomon Brothers and the investment banking industry, the markets for government securities, and the regulation of securities dealers and brokers is interwoven with Meriwether's story. Accessible to individuals with and without experience in investment banking.

Keywords: Debt Securities; Managerial Roles; Ethics; Market Transactions; Bonds; Investment Banking; Crisis Management; Auctions; Legal Liability; Banking Industry;

Citation:

Crane, Dwight B. "Salomon and the Treasury Securities Auction." Harvard Business School Case 292-114, March 1992. (Revised December 1992.)