Drexel CEO Fred Joseph, R.I.P.
“Investment banking is funny. You do one transaction, then you do another of the same type and then a third. Maybe then you’ve got a business. Do ten, and it is a business.”
- Fred Joseph, former CEO of Drexel Burnham Lambert, who died of multiple myeloma, at 72 on Friday. Given the junk-bond boss’s status in the Business Hall of Shame, you might think Joseph would earn a harshly critical obit. Not so, as the New York Times illustrates today.
Joseph passes on as more of a builder than a destroyer of wealth maybe because we’ve seen, since Drexel’s implosion 20 years ago, more despicable scandal–Enron, Madoff, etc.–and more catastrophic collapse, Lehman Brothers (BCS) above all. The son of a Boston cab driver who earned two degrees from Harvard, Joseph told Fortune in 1988 that he was guilty of just one thing, “surprising naivete,” amidst Drexel’s insider-trading scandal. He testified against Michael Milken, his partner, who went to prison and became a symbol of greed.
Milken, more visibly than Joseph, had a post-scandal resurrection–funneling his billions into philanthropy, cancer research, and global problem-solving via the Milken Institute, which still draws old Drexel execs to its powwows. These guys (yes, they were guys at the top of Drexel) had faults beyond “naivete,” obviously, but it shouldn’t detract from the fact that Joseph, as well as Milken, were ingenious in eyeing untapped markets and transforming corporate finance. “Our early niches were restructuring troubled REITs and working on equity offerings for companies that were small or troubled,” Joseph told Fortune in the 1988 first-person account of his rise and fall. “That later developed into high-yield bond offerings that we found filled a very important financing need. In those days, there was no long-term fixed-rate capital for most unrated corporations except private placements with insurance companies.”
Soon Drexel was doing junk bond deals for the cable-TV industry, then the airlines. “Sometimes we did it with new products,” Joseph said, noting that Drexel created initial-offering high-yield bonds and then high-premium convertible bonds. “We did two dozen of those deals before anybody else really got into them,” he added. “Timing and communication were always key.”
Patricia Sellers has written some of Fortune's most talked-about cover stories, including "Can Meg Whitman Save California?", Melinda Gates ("The $100 Billion Woman"), "MySpace Cowboys," Martha Stewart ("I cannot be destroyed"), Ted Turner ("Gone with the Wind") and Oprah Winfrey ("Oprah Inc."). And she has broken ground wi th insightful pieces on career management issues such as ego ("Get Over Yourself!"), and "Charisma: Do You Need It? Can You Get It?" Pattie chairs the annual Fortune Most Powerful Women Summit, the preeminent gathering of women leaders in business, philanthropy, government, academia, and the arts. And she has helped oversee Fortune's "Most Powerful Women in Business" cover package since its launch in 1998. She started at Fortune in 1984, covering the big consumer brand companies.
Jessica Shambora started with Fortune as a reporter in June of 2008, following a stint as assistant editor at Travel+Leisure Golf. Shambora has written for Sports Illustrated, SI Latino, Women's Health, and Triathlete. She is a frequent contributor to Postcards. 
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