Salomon Is Not Too Big To Punish

The $2.2 trillion market for U.S. Treasury securities is the largest, the most liquid, and probably the cleanest in the world. In the 1980s, markets for other American securities such as stocks, commodities, and junk bonds were plagued by scandals that raised serious questions about their integrity. But until Aug. 9, no serious questions of impropriety had been raised about the Treasury market. On that day, Salomon Brothers Inc., the market's leading player, admitted that in some recent Treasury auctions the firm violated government bidding rules. Then, on Aug. 14, the firm conceded that its top management, including Chairman and CEO John H. Gutfreund, was aware of bidding irregularities in April but failed to take appropriate action.

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