Drexel Burnham Lambert was one of the most successful Wall Street firms in the 1980s. The company made its largest profit during fiscal year 1986, $545.5 million. In 1987 their star employee Michael Milken earned a whopping $550 million, while it was the highest cash compensation during the year, it stands shy behind the $4 billion Sam Walton earned in price appreciation of Wal-Mart shares during 1987 ([1]) (see also executive compensation).

Business

Drexel's legacy of sponsorship for new and troubled companies remains an industry model today. They rose from the bottom of the pack to compete with Wall Street’s first rank firms. Stylistically, Drexel was more aggressive in their approach. Organizationally, the firm experimented. They offered a product that no one else had conceived "JUNK BONDS" and that, after it was conceived, competitors were slow to adopt.

In the late eighties, the arrest of Ivan Boesky then the later arrest of Michael Milken for insider trading scandals brought end to this company.

Criticism

In the 1980s the public was convinced that the leveraged restructuring movement was the work of capitalist fiends. The public and the press were unforgiving in their hostility toward the perceived engine of the takeover movement: the junk bond. Innovative instruments often generate antipathy, and none has generated more than junk. Some argue that the debt instrument itself was the cornerstone of the excess decade. James Brock , author of Dangerous Pursuits , writes, "Instead of marking a new development, the junkbond Eighties represent the last outbreak of a recurrently exhibited, extensively documented propensity for financial lunacy on a massive scale." Many people in modern times still view debt itself as bad, never mind its consequences. Many political and financial conservatives view credit on that scale as too powerful a force. Thus, the rapid growth of the junk bond market to roughly $200 billion in 1988 created a great deal of stress for prudent souls. Junk was called turbo-debt, a license to steal and a scheme that would embarrass even the famous con-artist Charles Ponzi.

External resources

• The Fall of Drexel Burnham Lambert and the Israeli Connection.