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Drexel Burnham Lambert was a prominent and very successful Wall Street investment bank which was forced into bankruptcy in February of 1990. It began as Burnham and Company, a small New York City retail brokerage firm founded in 1935 by I. W. Burnham II, a 1931 graduate of the Wharton School of the University of Pennsylvania. Burnham began his firm with $100, 000, of which $96,000 was borrowed from his grandfather, a founder of a Kentucky distillery.
The firm branched out into investment banking, and in 1973 it merged with Philadelphiabased Drexel Firestone, an ailing old line investment bank, which welcomed the merger with Burnham to form Drexel Burnham and Company. The name "Drexel Burnham" rather than "Burnham Drexel" was chosen because Drexel Firestone was known as a "major bracket" firm with the power to underwrite stocks and bonds, while Burnham and Co. was merely a "sub-major firm" with no such power. In 1976, Drexel Burnham merged with William D. Witter, the American arm of the Belgian company, Georges Bruxelles Lambert, and then incorporated as Drexel Burnham Lambert (DBL).
Great success followed, largely driven by DBL's dominance in the high yield bond market. Before the late 1970s, blue chip companies that had fallen on hard times had to issue high yield bonds (junk bonds), which often did not fare well in the future. But Michael R. Milken, a Wharton MBA who ran...