while acknowledging that it was "not in a position to dispute the allegations" made by the government. Nonetheless, Drexel was now a convicted felon. In April 1989, Drexel settled with the SEC, agreeing to stricter safeguards on its oversight procedures. Later that month, the firm eliminated 5,000 jobs by shuttering three departments—including the retail brokerage operation. In essence, Drexel was jettisoning the core of the old Burnham & Company. The retail accounts were eventually sold to Smith Barney. 1989-1990 Due to several deals that did not work out, as well as an unexpected crash of the junk bond market, 1989 was a difficult year for Drexel even after it settled the criminal and SEC cases. Reports of an $86 million loss going into the fourth quarter resulted in the firm's commercial paper rating being cut in late November. This made it nearly impossible for Drexel to reborrow its outstanding commercial paper, and it had to be repaid. Rumors abounded that the banks could yank Drexel's lines of credit at any time. Drexel had no corporate parent that could pump in cash in the event of such a crisis, unlike most American financial institutions. Groupe Bruxelles Lambert refused even to consider making an equity investment until Joseph improved the bottom line. The firm posted a $40 million loss for 1989—the first operating loss in its 54-year history. Drexel managed to survive into 1990 by transferring some of the excess capital from its regulated broker/dealer subsidiary into its holding company, Drexel Burnham Lambert Group—only to be ordered to stop by the SEC on February 9 out of concerns about the broker's solvency. This sent Joseph and other senior executives into a near-panic. After the SEC, the New York Stock Exchange, and the Federal Reserve Bank of New York cast doubts about a restructuring plan, Joseph concluded that Drexel could not stay independent. Unfortunately, concerns about possible liability to civil suits scared off an eleventh-hour attempt to find a prospective buyer. By February 12, it was obvious Drexel was headed for collapse. Its commercial paper rating was further reduced that day, and the holding company defaulted on $100 million in loans. Citibank led a group of banks that tried to put together a loan package for the reeling firm, but this came to nothing. With other firms shutting Drexel out of deals, Joseph's last resort was a bailout by the government. Unfortunately for