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:
“Nothing would improve newspaper criticism so much as the knowledge that it was to be read by men too hardy to acquiesce in the authoritative statement of the reviewer.”
—Richard Holt Hutton (1826–1897)
“Good criticism is very rare and always precious.”
—Ralph Waldo Emerson (1803–1882)
“Of all the cants which are canted in this canting world—though the cant of hypocrites may be the worst—the cant of criticism is the most tormenting!”
—Laurence Sterne (1713–1768)