Legg Mason reaches 100

Centennial: As Legg Mason Inc. celebrates its 100th anniversary this year, it can look back on times that have been by turns turbulent and euphoric.

July 25, 1999|By Bill Atkinson | Bill Atkinson,SUN STAFF

Baltimore was a vibrant city when George Mackubin struck out on his own. Although he was only a spindly 25-year-old, he was brash and supremely confident.

Having served two stints in brokerage houses, Mackubin knew there was money to be made, and he wanted his share.

One hundred years ago, Mackubin opened a brokerage firm in downtown Baltimore, a one-man firm, tucked away in a room in the old Baltimore Stock Exchange Building on German Street (now Redwood Street). If only he could see his company now.

Although it has undergone several name changes, Mackubin's modest creation has evolved into Legg Mason Inc.

The company has flourished despite the great Baltimore fire of 1904, two world wars, the crash of 1929, the Great Depression and the wave of mergers in the 1990s.

But Legg Mason isn't just a chronicle of survival; it is an illustration of how the company became a "crown jewel" in its industry. It manages $93 billion in assets -- more than any other regional investment house in the country -- has 4,350 employees, 128 brokerage offices and revenue topping $1 billion, and it dominates Baltimore's skyline, occupying one of the tallest office towers downtown with its name gleaming in large, gold block letters.

"There are very few firms that have lasted 100 years," said George Ferris, chairman of competitor Ferris, Baker Watts Inc., which has been in business for 99 years. "Legg Mason has had super management."

Yet, as Legg prepares for its annual meeting on Tuesday, questions remain about its future. Is it large and diverse enough to thrive against such huge companies as Citigroup, Merrill Lynch & Co. and Morgan Stanley Dean Witter & Co.? Is it positioned to handle a severe decline in the stock market? Will it follow in the footsteps of other Baltimore companies and sell out, especially because its top executives are nearing retirement?

"Legg Mason continues to impress me as being one of the most stable firms in a quickly changing industry," said Michael Flanagan, a brokerage analyst at Philadelphia-based Financial Service Analytics. "The greatest testament to Legg Mason's longevity is its single-minded pursuit to meeting the investment objectives of its clients."

George Mackubin couldn't have picked a better time to open up shop. Baltimore was buzzing in 1899. A city of 416,805 people, it was a thriving industrial town that went to work by the factory whistle. Garment shops on Eutaw Street churned out men's suits. Mills in Hampden-Woodberry spun out cotton cloth. Ships steamed into the harbor heavy with sugar, bananas and bat guano for fertilizer. And trains rumbled into town loaded with tons of copper, coal and iron.

The landscape abruptly changed in 1898 and 1899 as the families that controlled businesses began selling out to huge trust companies.

"Within the space of two years, the industrial base of Baltimore was sold out of town, lock, stock and barrel," Sherry H. Olson wrote in her book "Baltimore."

The sell-off left families and owners awash in cash, exactly what the fledging George Mackubin & Co. needed.

Mackubin's chances for success were probably greater than those of most men his age. He was from a wealthy family in Ellicott City. His father, James Mackubin, was a lawyer who owned a three-story mansion called MacAlpine, which had slaves to tend to the estate. His mother, Gabriella Peter, was a descendant of Martha Washington.

Mackubin was only 25, but he had picked up experience by working at two brokerage houses in the city and in 1896 borrowed $300 to buy a seat on the Baltimore Stock Exchange.

Eleven months after opening the firm, he hired G. Clem Goodrich, the son of a Presbyterian minister, 16 years Mackubin's senior, who worked at a clearinghouse in Baltimore that moved checks from bank to bank. In January 1900, two months after joining the firm, Goodrich was named partner, and the company was renamed Mackubin, Goodrich & Co.

Like other brokerages, the firm hung a chalk board on a wall and placed a bench in front of it so that clients could sit and watch the "board boy" chalk up the latest stock prices.

It was a thankless job, and the first two board boys left the firm shortly after being hired.

Legg, the board boy

The third board boy excelled. He was 19, and his name was John C. Legg Jr. In five years, he was a partner.

Legg "studied the investment business, and the more he learned, the more he had to do," noted A. Catherine Overbeck, a company employee who maintained a journal on the firm's early years.

With Mackubin, Goodrich and Legg, the company's foundation was in place. It wasn't long before the strength of that foundation was tested.

Sunday, Feb. 7, 1904, was cold and blustery in Baltimore, and the streets were quiet. The silence was shattered at 10: 48 a.m. by a clanging alarm at the John E. Hurst & Co. dry goods business on German Street. As the building was swallowed in flames, an explosion blew off the roof and showered flaming debris onto the tops of neighboring buildings.

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