Den of Thieves.

• Author: Lewis, Michael

Sure, Milken and Boesky got busted. But that's not why Wall Street went bust. ne day some smart person will refute the conventional wisdom that the hippies of the sixties and the yuppies of the eighties were polar opposites. It is true that in a short 20 years the attitude of American youth to the free market turned 180 degrees-that the Berkeley seniors who once hooted with delight as Abbie Hoffman floated dollar bills onto the heads of traders from the gallery of the New York Stock Exchange cheered when Ivan Boesky, in his famous commencement address, told them that

[G]reed is healthy. You can be greedy and still feel good about yourself." But the real connection between the sixties and the eighties is that both witnessed a direct challenge by American youth to the American corporate establishment. Only this time the radicals wore suits.

The spiritual center of the financial eighties was Drexel Bumham's annual junk bond sales conference, known as the Predator's Ball. The event first took place in 1977 as a sober gathering of less than a dozen Drexel clients but quickly became an annual celebration of the ideas that made the last decade revolutionary: that debt is good, that the market is inherently moral, and that finance could and should be used as a weapon against entrenched corporate drones. By 1985, the Predator's Ball was drawing more than 100 companies that had issued junk bonds through Drexel, and an audience of 1,500 investors who controlled an estimated I trillion dollars in junk-bond buying power. They listened raptly to CEO Fred Joseph explain Drexel's newest idea for financing any client with the right attitude who wished to raid a company. "For the first time in history," said Joseph, "We've leveled the playing field. The small can go after the big." Or, as another Drexel banker put it, "We're going to tee-up GM, Ford, and IBM and make them cringe."

Anyone who explains the success of the Predator's Ball explains a lot of what happened in the last decade. But this is not as easy as it sounds. The common perception is that the new corporate willingness to borrow money was caused by a tax code that favored debt over equity. But the tax code favored debt long before Drexel's junk bond king, Michael Milken, came of age, and it still does. What's more, the tax argument fails to explain why investors bought junk bonds. A favorite explanation is that investors succumbed to the mass insanity of the bull market. "What you don't know,"...