debt. On Wall Street, that is equivalent to having discovered fire. In 1990 Drexel collapsed and Mr Milken pleaded guilty to fraud. Thus scattered his disciples. Some firms fail spectacularly but are quickly forgotten, whereas Drexel has enjoyed an afterlife among the gods. Apollo was started by Leon Black, a Milkenite who ran Drexel’s merger-advice department. Two other investment firms, Ares and Cerberus, were built by Drexel alumni. So was Moelis, an investment bank. Even Goldman Sachs is now run by a former Drexel banker. Apollo’s rise from Drexel’s ashes was both an inside job and a cosmic fluke. When the market for junk bonds collapsed, it also took down some insurers that owned them. Few were in a better position than Mr Black to buy cheap Drexel-era bonds from Executive Life, a failed Californian insurer. The source of his capital? Obliquely, the Elysée. After receiving a cold call from a banker, Mr Black raised funds from Crédit Lyonnais, a lender controlled by the French government. Crédit Lyonnais ended up facing years of costly litigation over its orchestration of a takeover of Executive Life (American law prevented any bank, let alone a French one, from acquiring an insurer). But Apollo made a fortune on the bonds and began raising money from American pension funds. By January 2008 Apollo was big enough to bet around $30bn on Harrah’s, a Las Vegas casino. The deal was a disaster (and is itself the subject of a book). Even so, Apollo had a good war, which is to say it emerged from the global financial crisis ready for an expansionary blitz: assets were cheap and a new set of financial regulations pushed lending out of banks and towards investment firms like Apollo. Starting in 2009 Marc Rowan, who now runs Apollo, cobbled together life- insurance portfolios to create Athene, an enormous insurer that forms the backbone of the firm today (Apollo and Athene fully merged in 2022). The simple idea that insurers should own illiquid debt with higher yields, and progressively more complicated ideas about how to manufacture such debt, have made Apollo a fortune. Seemingly everyone on Wall Street has rushed to copy some version of Mr Rowan’s trade, making another Executive Life disaster seem inevitable.
Wall Street spends little time naming its firms (hence the Greek). But it pays great attention to titles. In 2007 Mr Rowan and Josh Harris, a dealmaker who specialised in buying chemical firms, were elevated as “co-founders”, marking them as the likely candidates to one day run the business. Unusually for a two-horse succession race, one spent years running in the wrong direction. So convinced was Mr Black of Mr Rowan’s claim he didn’t want the top job that in 2018 Mr Black discussed a merger with Brookfield, a big asset manager, rather than hand over to Mr Harris, whom he now calls a “psychopath". But it was Mr Black’s own moral failures that brought Apollo’s succession drama to a boil. In 2021 he resigned soon after it emerged that he had paid $158m to Jeffrey Epstein for, he says, estate and tax advice from the late sex offender (Mr Black has denied wrongdoing). “Money to Burn” reproduces the whole affair in prodigious detail. Readers learn that while negotiating a pay-off to a former girlfriend at the St Regis hotel in Manhattan, Mr Black orders a Diet Coke with lemon. She'll have a cappuccino, please—and a yearly stipend of $1.2m. Mr Black’s costly misjudgment was not for want of expensive advice. The tale of his downfall features many investment bankers, which Mr Cohan once was, and spin-doctors, who sought to bend newspaper stories about Apollo and its top brass. But mostly there are lawyers—legions of them. Lawyers to engineer the intricate mechanisms of Mr Black’s personal trust. Lawyers to correct a fatal (ie, taxable) error in the plan (with the help of Epstein). Lawyers to investigate the circumstances under which Epstein became involved with Mr Black. There are lawyers suing bankers, spin- doctors and, of course, other lawyers. It is a Shakespearean tragedy measurable in billable hours. “Money to Burn” is a remarkable work about financial genius and human failure. It will be widely read for two reasons (besides satisfying salacious curiosity about some of the world’s wealthiest investors). The book is partly an obituary for a financial system that Mr Milken created and of which Mr Black was one of the last big names. That private-equity bosses are famously willing to change leadership at the companies they own but slower to replace themselves is the source of much tension in the buy-out industry. Soon, however, everyone who once worked at Drexel will have retired.
Mr Cohan’s book is also the first detailed history of one of the giant investment firms that have become as important to the financial system as large banks since the crisis, and take many of the risks those banks used to. Since trading giants like Jane Street and Citadel, the other big disrupters, are private institutions, the world may be waiting a while for the next account. After reading this book, their bosses will be keen to keep it that way. ■ This article was downloaded by zlibrary from https://www.economist.com/business/2026/08/26/an-obituary-for-the-drexel-generation
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Finance & economics | Treasury v Treasuries Scott Bessent takes on the bond market And makes trouble for the Fed Aug 27th 2026 Scott Bessent often says he wants to be America’s “top bond salesman”. An accountant might raise an eyebrow, though, on encountering a salesman who juiced his figures by purchasing his own wares. On August 19th Mr Bessent set out plans for the Treasury to buy back tens of billions of dollars’ worth of long-dated government debt.
His announcement has had only a limited effect. But it has sent an important signal to markets: that the Treasury is willing to fight to hold yields down, if they keep rising as they have in recent months. Yields fell at first, then edged back up and have since edged down again (see chart 1). The latest decline may reflect reports that Mr Bessent is considering further buy-backs and funding them from the Treasury General Account, in effect the government’s bank account at the Federal Reserve. This year yields on government bonds around the world have climbed (ie, prices have fallen). High inflation had still not been entirely beaten back after the post-pandemic surge when America and Israel went to war with Iran in February, pushing up oil prices. Private borrowing to fund the vast build-out of artificial-intelligence data centres has also made capital costlier for everyone, including governments.
Most worrying, bond markets are beginning to reckon with the rich world’s debt binge. America’s budget deficit is 6% of GDP, the widest ever outside recession and wartime (see chart 2). Mr Bessent’s own target of reducing the deficit to 3% of GDP by 2028 looks fanciful. Other big economies, notably France and Japan, are also in poor fiscal shape. Worse, more than half of America’s deficit now consists of interest payments on past borrowing. There is a risk that a vicious circle takes hold: of rising yields, bigger deficits, still higher yields and so on. That is not only a budgetary problem, but also a political one for the Trump administration. The midterm elections are less than ten weeks away and “affordability” is the word of the moment. Yet the two most salient costs for many voters—petrol prices and the 30-year mortgage rate—are both moving in the wrong direction. With his buy-backs, Mr Bessent has tried to put his thumb on the scale. Usually, the Treasury sees its role as keeping the bond market orderly and liquid during crises, not jostling yields around in what should be quieter times. Mr Bessent, sounding rather like the hedge-fund trader he once was, has taken a different view. “We believe that the yields don’t reflect the underlying fundamentals,” he said in a television interview. That prompted a ferocious response from Stanley Druckenmiller, a celebrated macro investor
and Mr Bessent’s former boss, who urged him to “let the bond market speak” in the Wall Street Journal. (Oddly, Mr Druckenmiller has admitted that his article was drafted by an AI chatbot.) The Fed—the other centre of power in American macroeconomic policy— does sometimes try to move bond yields, through programmes such as quantitative easing (buying bonds by creating bank reserves) or “Operation Twist” in 2011 (selling short-term Treasuries and buying long-term ones, a central-banking mirror of Mr Bessent’s scheme). But its goal has always been a short-term economic one, such as fighting recession or inflation, not keeping the government’s finances afloat. Ironically, Kevin Warsh, the Fed’s new chair, who was picked in a process run by Mr Bessent, has disavowed quantitative easing and says policymakers should not leave a heavy footprint in markets. Another irony is that Mr Bessent criticised his predecessor, Janet Yellen, for politicising the Treasury and interfering with the Fed’s work. Under Ms Yellen, the Treasury nudged up the share of government debt issued at shorter maturities. That, like Mr Bessent’s buy-backs, shifted borrowing from long- to short-term debt. Ms Yellen’s Treasury called it technocratic debt management; Mr Bessent echoed criticism of this as “activist Treasury issuance” to juice the economy before the 2024 election. After taking charge, Mr Bessent quietly maintained the same issuance pattern. Now, loudly, he has gone further. The buy-backs are only the administration’s latest effort to resist rising bond yields. In July Mr Bessent structured his joint intervention with Japan to boost the yen to minimise its impact on Treasuries. Opening a dollar swap line with the United Arab Emirates, said to be under discussion, would ensure that the Emiratis’ sovereign-wealth fund would not need to sell its Treasuries in a crunch. In addition, over the past year Fannie Mae and Freddie Mac, the government-backed bodies that package up mortgages, have increased their purchases of mortgage-backed securities in an apparent effort to push down mortgage rates (see chart 3). (Support for Argentina’s peso during a tight election fight for Javier Milei, the country’s president, also illustrated Mr Bessent’s willingness to use American financial firepower for political purposes.)