Newspaper article THE JOURNAL RECORD

Task Force on Drexel Bankruptcy Formed

Newspaper article THE JOURNAL RECORD

Task Force on Drexel Bankruptcy Formed

Article excerpt

By Dave Skidmore WASHINGTON - Regulators formed a legal task force Wednesday to seek compensation for taxpayers from bankrupt Drexel Burnham Lambert Group for junk bond losses suffered by failed savings and loans.

Alfred Byrne, general counsel of the Federal Deposit Insurance Corp., said the agency has preliminary information linking Drexel and its former junk bond chief, Michael Milken, to millions of dollars lost by a number of failed thrifts in junk bonds.

The Federal Deposit Insurance Corp., which insures bank and thrift deposits, and the Resolution Trust Corp., responsible for closing or merging hundreds of failed thrifts, may be Drexel's largest creditors, he said.

``We intend to recover the maximum amount possible for our insurance funds and, ultimately, for the American taxpayer,'' Byrne said. He declined to estimate the amount of the losses and the number of S&Ls involved.

The task force, headed by FDIC deputy general counsel Jack Smith, will consist of 10 to 12 attorneys from the FDIC and RTC. It is aiming for a share of the $350 million set aside by the Securities and Exchange Commission for claimants of Drexel and the $400 million set aside for claimants of Milken.

Drexel, which sold investors billions of dollars worth of the risky, high-interest debt securities known as junk bonds, sought bankruptcy protection in federal court in New York in February. A judge scheduled Nov. 15 as the deadline for bringing claims against the firm.

Smith said regulators may bring one consolidated claim on behalf of the insurance fund or coordinate the filing of separate claims for each insolvent institution involved.

The FDIC-RTC legal group also will be considering possible criminal referrals to the Justice Department concerning Milken and Drexel. …

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