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When Fred Joseph came on board Drexel Burnham Lambert back in the mid 1970s, the firm was fairly small. But he met a young trader at the firm he considered to be brilliant: Mike Milken. Yes, this was the beginning of a major transformation on Wall Street, which would lead to the decade of deals during the 1980s.Unfortunately, over the weekend, Joseph died. He was 72.
A Harvard MBA, Joseph got his first break on Wall Street when he joined E.F. Hutton in 1963. Seven years later, he moved over to Shearson Hammill and and eventually became the chief operating officer.
With his executive experience, Joseph was a hot commodity. But he wanted to go to a firm that was poised for growth. This was Drexel (he would eventually become the chief of the firm in 1985).
Joseph also realized that Mike Milken's junk bonds had huge potential. Originally meant for financing up-and-coming companies, Joseoph thought they could be a great way to finance corporate buyouts.
As a result, Drexel became the center of some of the largest deals of the 1980s. In fact, it seemed that no company was immune from a junk bond offer.
But Drexel also became the center of the excesses on Wall Street. An aggressive US Attorney, Rudolph Giuliani, led a prosecution against Milken and the firm. By 1990, Milken pleaded guilty to six felony securities violations and served nearly two years in prison. He also paid a whopping $600 million fine.
Because of this, Drexel crumbled and filed for bankruptcy.
While Joseph was not implicated in any criminal involvement, he was banned from the securities industry for some time. But by 1994, he returned to the industry, becoming the chairman of Clovebrook Capital and then was the senior adviser/managing director of ING Barings LLC. By 2001, he joined a middle market investment bank, Morgan Joseph.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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