Drexel & Co.
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| Private | |
| Industry | Financial Services |
| Fate | Forced into bankruptcy |
| Founded | 1935 |
| Founder | I. W. "Tubby" Burnham |
| Defunct | 1994 |
| Headquarters | New York, New York, United States |
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Key people
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Michael Milken |
| Products |
Investment Banking Investment management |
Drexel Burnham Lambert was a major Wall Street investment banking firm which was forced into bankruptcy in February 1990 due to its involvement in illegal activities in the junk bond market, driven by Drexel employee Michael Milken. At its height, it was the fifth-largest investment bank in the United States.
I.W. "Tubby" Burnham, a 1931 graduate of the Wharton School of the University of Pennsylvania, founded the firm in 1935 as Burnham and Company, a small New York City–based retail brokerage. Burnham started the firm with $100,000 of capital, $96,000 of which was borrowed from his grandfather and the founder of a Kentucky distillery.
It became one of the more successful brokerages in the country, eventually building its capital to $1 billion. Burnham eventually branched out into investment banking. However, the company's ability to expand was limited by the structure of the investment banking industry of that time. A strict unwritten set of rules assured the dominance of a few large firms by controlling the order in which their names appeared in advertisements for an underwriting. Burnham, as a "sub-major" firm, needed to connect with a "major" or "special" firm in order to further expand.
Burnham found a willing partner in Drexel Firestone, an ailing Philadelphia-based firm with a rich history. Drexel Firestone traced its history to 1838, when Francis Martin Drexel founded Drexel & Company. His son, Anthony Joseph Drexel, became a partner in the firm at age 21, in 1847. The company made money in the opportunities created by mid-century gold finds in California. The company was also involved in financial deals with the federal government during the Mexican–American War and the U.S. Civil War. A. J. Drexel took over the firm when his father died in 1863. He partnered with J. P. Morgan and created one of the largest banking companies in the world, Drexel, Morgan & Co.
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