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Facts Kidder, Peabody & Co. was organized in 1865 in Boston, by Henry Kidder, Francis Peabody, and Oliver Peabody. By the beginning of the 1900’s, the company had become the leading banking house in New England. The market crash of 1929 would have put them out of business had it not been for several investors helping out due to the goodwill of the company. In March 1931, a new partnership was founded under the company’s name by Chandler Hovey, Edwin Webster, and Albert Gordon. By 1985, the company had $363 million in capital and was ranked 15th in the industry. The firm had funded its growth through accumulated profits, which limited its growth opportunities. In 1986, GE bought 80% for $602 million. GE purchased the remaining equity in 1990. The company was initially managed by Kidder insiders, but was turned over to Michael Carpenter in January 1989. He was formerly the number two executive for GE Capital Services. He wanted to bring GE’s successful management practices to Kidder and his goal was to make the company the market leader. Several key managers left due to the lowering of their bonuses despite increased profits. Joseph Jett was hired in July 1991 to trade the long-end market for STRIPS (Separate Trading of Registered Interest and Principal of Securities). These are a type of zero coupon financial instrument related to U.S. Treasury notes and bonds. Mr. Jett had previously worked at Morgan Stanley for two years before being laid off, and then worked at First Boston for eighteen months before being fired. He was supervised initially by Melvin Mullin, the head of the government desk. When Mr. Mullin became head of the derivatives division in February 1993, he recommended Mr. Jett to fill his spot at the government desk. Edward Cerrulo was head of the Fixed Income Division. This division accounted for the majority of the company’s earnings and balance sheet. It employed a large salesforce and had twelve different trading desks. Mr. Cerrulo supervised the desk heads and the trading performance of those who traded actively. Mr. Jett was an active trader. A manager of business development and a risk manager assisted Mr.
Approximate Word count = 1443
Approximate Pages = 5.8
(250 words per page double spaced)
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