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This Day In Market History: Junk Bond Bank Drexel Burnham Lambert Goes Bankrupt

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This Day In Market History: Junk Bond Bank Drexel Burnham Lambert Goes Bankrupt
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Each day, Benzinga takes a look back at a notable market-related moment that happened on this date.

What Happened

In 1990, the parent company of investment bank and junk-bond firm Drexel Burnham Lambert filed for Chapter 11 bankruptcy protection.

Where Was The Market

The Dow Jones Industrial Average closed at $2,624.10, while the S&P 500 closed at $331.02.

What Else Was Going On In The World

On the same day, the U.S., U.K. and France sanctioned Germany’s intent to reunify.

Drexel Burnham Lambert Began Its Collapse

After years of regulatory pressure for securities fraud and mounting concerns in the junk-bond business, Drexel Burnham Lambert’s holding company defaulted on $100 million in loans, prompting a sell-off in the subsidiary’s securities and the distancing of other Wall Street firms.

The company had supported many of the largest corporate mergers in the 1980s and pioneered the financing of high-risk ventures with high-yield junk bonds.

At the time, Rep. Chuck Schumer called its closure a “sad day for New Yorkers and a sad day for the American financial system.”

“It represents a significant blow to New York City's economy and marks the end of an era in American finance,” Schumer told the New York Times.

At its peak, Drexel Burnham Lambert was Wall Street’s most profitable firm with $545 million in earnings on $4 billion-plus revenue. A small remnant of the company continues on under the name New Street Capital.

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