This post is part of a series on some of the most memorable companies that have disappeared.

"When E.F. Hutton talks, people listen," claimed the well-known slogan from the respected broker's ubiquitous ads in the 1970s and 1980s. Well, it seems people stopped listening when E.F. Hutton & Co. was caught check kiting and money laundering.

The American firm was founded in 1904 by Edward Francis Hutton. It grew to become one of the most respected U.S. financial firms, and for many years was the second-largest brokerage in the United States. Edward Hutton held the reins at the company until his death in 1962.

But in 1980 some Hutton branches began shifting funds from one account to another, effectively giving itself interest-free loans until the checks cleared. Of course the scheme eventually came to light, and in 1985 Hutton pleaded guilty to 2,000 counts of mail and wire fraud. However, the SEC uncharacteristically allowed Hutton to stay in business.

An internal investigation in 1987 uncovered that a Providence, Rhode Island, branch was laundering money for a crime family. Hutton voluntarily brought this matter to the SEC, but all signs suggested Hutton couldn't count on leniency a second time. However, this happened just before the stock market crash of 1987. With that, along with all the bad press, the firm's deep debt going back to 1985, and its star performers defecting to other firms, Hutton was on the verge of collapse by the end of the year, and so agreed to be acquired by Shearson Lehman Brothers.

Continue reading Companies that vanished: E.F. Hutton -- who's listening now?

Companies that vanished: E.F. Hutton -- who's listening now? originally appeared on BloggingStocks on Wed, 11 Jun 2008 17:40:00 EST. Please see our terms for use of feeds.

I was in high school on October 19, 1987, when the equities markets went into a death spiral -- losing a stunning 22.6%. My mom asked me: "Are we going to have a Depression?" I didn't think so. After all, by looking around, it seemed like things were fine (in the real world at least).

Well, the memories are coming back as we approach the 20th anniversary of the event. And, Barron's [a paid publication] has an excellent piece on the topic.

Despite events such as September 11th and the Long-Term Capital meltdown, the U.S. markets have proven to be resilient since Black Monday. Although, we had a recent close-call. That is, in August, it did look like the U.S. markets were headed for a crash. Goldman Sachs (NYSE: GS), Merrill Lynch (NYSE: MER), and other top financial institutions plunged. Hedge funds went into chaos. There was a credit crunch. Buyouts came to a halt.

The good news is that it looks like the Federal Reserve has learned some important lessons and reversed the carnage.

Continue reading Barron's looks back at Black Monday

Barron's looks back at Black Monday originally appeared on BloggingStocks on Sat, 13 Oct 2007 16:40:00 EST. Please see our terms for use of feeds.