When Drexel Hit Rock Bottom: How February 13, 1990 Shook Wall Street
In this edition of This Week in Wall Street History, host Todd M. Schoenberger revisits the dramatic downfall of Drexel Burnham Lambert. On February 13, 1990, after intense regulatory pressure, the firm was forced into Chapter 11 bankruptcy—marking the first major Wall Street collapse since the Great Depression.
At its peak in 1986, Drexel was the fifth-largest investment bank in the U.S., fueled by runaway junk bond profits and aggressive deal making under Michael Milken's leadership. But a wave of insider trading charges, a record $650 million SEC fine, and evaporating market confidence dragged the firm into insolvency.
What can today’s markets learn?
- Unchecked ambition without robust oversight can result in catastrophic failure—regardless of previous success.
- Modern parallels: As we navigate surging debt, rising inflation, and novel crypto-leveraged instruments, the Drexel example is a reminder that regulatory breaches can bring giants to their knees in a heartbeat.
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