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A. A false picture has been painted. There was no expectation of the collapse at the time the bonuses were paid, and the vast majority of them were obligations from the previous year.
Q. One thing you might have done differently was not to take your own $2.5 million bonus in the form of Drexel stock, which is now virtually worthless.
A. My wife would certainly say that. I took the bonus in stock to encourage other employees to do the same. At least nobody could accuse me of having some prophet's ability to predict the coming crisis.
Q. Did you ever fear that junk bonds were a house of cards?
A. I think that's rhetoric from the press and politicians. High-yield bonds are a $300 billion market and there will be cycles, but there's no question of their legitimacy.
Q. But wasn't the market too dependent on one man, former Drexel financier Michael Milken? And did his dismissal from Drexel cause irreparable harm to morale?
A. It's hard to judge midstride, as we are right now, whether the market was too dependent on Milken. It's going to take more time to know. Michael is incredibly knowledgeable, but our high-yield department was a major team effort. We put together the RJR-Nabisco deal after Milken. As for morale, he had some pretty fervent supporters in the company, but I don't think there was any irreparable discontent when he left.
Q. Did Milken really start a so-called whisper campaign against Drexel after he was dismissed?
A. I have no idea. But from the beginning this case has involved what people now call combat public relations by Milken's defenders and enemies at levels that I think are unseemly. And I'm disturbed that while the gods are up there fighting, Drexel has gotten swept into it in ways that are reasonably horrifying.
Q. Your colleagues say you always keep your cool. How do you cope?
A. Getting rattled doesn't help you perform. At this point we've taken Drexel's $25 billion of inventory positions down to around $1 billion, and I'm too busy to try to figure out the long-term psychological impact on me. But it's been very sad to watch the dismantling of what we built. We were trying to create the most effective investment bank in the country, and for a moment in time, we achieved that.