San Jose settled with Drexel Burnham Lambert over a suit the city filed to recoup a $60-million bond market loss, according to the city attorney's office. The city will receive $850,000 under the settlement with the firm, one of 13 investment brokers the city sued three years ago. Salomon Bros. agreed last October to pay $250,000. The suit alleged that the brokers took advantage of the city's former money managers by recommending speculative, long-term investments known to be unsuitable for the city. The city sold most of the bonds, taking a $60-million loss.