Barbarians of yore perish in bonfire of inanities

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: In the fall of 1988, giants walked Wall Street, causing corporate America to tremble and capturing the public imagination in best-sellers. Salomon Brothers' John Gutfreund challenged his traders to a million-dollar hand in "Liar's Poker." Michael Milken trafficked in junk bonds and intrigue in "Den of Thieves.'' Leveraged-buyout rivals Henry Kravis and Ted Forstmann vied to acquire RJR Nabisco in "Barbarians at the Gate."

In the fall of 2008, Lilliputians walk what's left of the Street. Last month, the nine biggest banks' leaders were summoned to Washington by treasury secretary Henry Paulson, who said he had an offer they couldn't refuse.

They would get the first chunk of a $250 billion government infusion of capital into the banking system. Uncle Sam would pay each of the assembled banks as much as $25 billion for a new class of preferred stock -- and impose some onerous terms, like capping executive pay. Just sign the term sheet, Paulson said; this wasn't negotiable. And they did.

So how did this once-proud breed manage to go from bestriding the business world to groveling in Washington? It's a pertinent question as we near the 20th anniversary of the climax of the roaring '80s: On Nov. 30, 1988, Kohlberg Kravis Roberts & Co. bid a record-smashing $25 billion to win the battle for RJR Nabisco.

(Full commercial disclosure: “Barbarians at the Gate,'' which I co-wrote with Bryan Burrough, has been re-issued in hardback to mark that anniversary.)

Gold paving

The road from there to here was hardly straight downhill. For long stretches, it was gloriously paved with gold. It ended "Thelma and Louise" -style, with banks plunging off a cliff, for a simple reason. Bankers refused to settle for being bankers.

The old role of Wall Street — to advise and finance American business — was thought to be for remnants of the white-shoe crowd. They had no imaginations, no aspirations, no places in the Hamptons. Wall Street became increasingly and fatefully a business of blue smoke and mirrors.