No Federal Help in Drexel's Last Hours;Top Administration Officials Told Firm Bankruptcy Was Best Course
As its final hours of solvency ticked away Monday night, Drexel Burnham Lambert's top executives still clung to the hope that the Bush administration would send some signal that it wanted the beleaguered Wall Street firm to survive. Such a signal might coax worried bankers and lenders to give Drexel more breathing room in meeting hundreds of millions of dollars in loan obligations.</br></br>But late Monday, Drexel got a different message. Securities and Exchange Commission Chairman Richard C. Breeden and E. Gerald Corrigan, president of the Federal Reserve Bank of New York-two officials who might have led a rescue party for Drexel-telephoned to say that no help was coming, according to sources close to the discussions.</br></br>Breeden told Drexel Chief Executive Frederick Joseph that senior Bush administration officials, including Treasury Secretary Nicholas F. Brady, had concluded that the best step for Drexel and the financial markets was a bankruptcy filing, the sources said. To delay would only add to the risk that Drexel's financial plight would shake investor confidence, causing a much wider, more dangerous problem for Wall Street, Breeden reportedly told Joseph. At the same time, Breeden acknowledged that the decision was up to Drexel's board of directors.</br></br>The next day, Drexel threw in the towel, announcing first that it was defaulting on $100 million in loans, and later, that the parent company was filing for bankruptcy protection-a preliminary step toward an expected dissolution of the firm.</br></br>Thus, the Bush administration added another chapter to the longstanding, often hostile relationship between Wall Street and Washington.