Criticism
By the late 1980s, public confidence in leveraged buyouts had waned, and criticism of the perceived engine of the takeover movement, the junk bond, had increased. Innovative financial instruments often generate skepticism, and few have generated more controversy than high yield debt. Some argue that the debt instrument itself, sometimes dubbed "turbo debt," was the cornerstone of the 1980s "Decade of Greed." However, junk bonds were actually used in less than 25% of acquisitions and hostile takeovers during that period. Nevertheless, by 1990 default rates on high yield debt had increased from 4% to 10%, further eroding confidence in this financial instrument. Without Milken's cheerleading, the liquidity of the junk bond market dried up. Drexel was forced to buy the bonds of insolvent and failing companies, which depleted their capital and would eventually bankrupt the company.
Read more about this topic: Drexel Burnham Lambert
Famous quotes containing the word criticism:
“Like speaks to like only; labor to labor, philosophy to philosophy, criticism to criticism, poetry to poetry. Literature speaks how much still to the past, how little to the future, how much to the East, how little to the West.”
—Henry David Thoreau (1817–1862)
“Good criticism is very rare and always precious.”
—Ralph Waldo Emerson (1803–1882)
“People try so hard to believe in leaders now, pitifully hard. But we no sooner get a popular reformer or politician or soldier or writer or philosopher—a Roosevelt, a Tolstoy, a Wood, a Shaw, a Nietzsche, than the cross-currents of criticism wash him away. My Lord, no man can stand prominence these days. It’s the surest path to obscurity. People get sick of hearing the same name over and over.”
—F. Scott Fitzgerald (1896–1940)