This nation owes Michael Milken an apology (and much more)...

I didn’t want something like this to be the first substantive post I make on this blog, but I’ve been busy and this topic sort of fell into my lap. So, here it goes.

I was discussing high-yield bonds with an economics major a few days ago at the university I attend and, naturally, Michael Milken came up. Now, by way of full disclosure, as far as I could gather, this particular individual's influences are Keynes and Samuelson. So, of course, he launched into the tired old tirade about Milken (“The Junk Bond Lord” he kept calling him) putting little old ladies out on the streets in financial ruin, about all the damage the junk bond scandal had caused the economy and how all of this is what happens when we (i.e., the government) allow the economy and all its actors to run around unchecked by regulations.

For those of you who don’t know, Michael Milken is the financier who pretty much single-handedly created the high-yield bond market in the ‘70s and ‘80s. In 1988, however, the SEC filed securities fraud charges against Drexel Burnham Lambert, a major Wall Street investment banking firm, and one of their directors Michael Milken. Milken had set up a high-yield bond trading department within DBL that would soon produce an amazing 100% return on investment. The whole tragic story of the government’s hounding and destroying of this man’s career is chronicled in the book Payback: The Conspiracy to Destroy Michael Milken and His Financial Revolution. The whole thing is too long and fury-inspiring for me to get into it now.

Milken eventually plead guilty to six securities felonies in a plea bargain that permitted him to escape jail time but required what amounted to $600 million in fines and other charges. He was sentenced to ten years in prison anyway.

Now that the background is done, my response to this individual was essentially this:

Michael Milken did more for America than all of the 20^th century’s altruist heroes combined.

Let us break this down. Milken created millions of jobs. Millions. He was a financial pioneer who created a new and innovative way for businesses to raise capital. Enjoy that cell phone in your pocket? The reason they are so cheap and ubiquitous is because of the junk bonds that helped fund MCI in the 1980s. Own anything from Barnes & Noble, Chrystler, Calvin Klein, Hasbro, Mattel or Time Warner (there are countless others)? Milken’s junk bonds financed all of these companies (keeping many from bankruptcy).

Incidentally, Milken did donate hundreds of millions of dollars to education and medical research. But you’ll almost never hear about that from his detractors. So, why is he trashed whenever his name is brought up? He was selfish. His financial genius made him a billionaire. And he did it on Wall Street, working for an investment bank—you can’t get much more capitalist than that. This alone, of course, is grounds for condemnation by the dominant moral philosophy of the day: altruism (both religious and secular alike). Milken became the “symbol of 1980s greed”, and that was his real crime. He was condemned and punished primarily for being successful.

As a final note, I suggest everyone read ABC reporter John Stossel’s book Give Me a Break wherein there is a section in which he claims that Michael Milken, as a greedy capitalist financier, has done much more good for humanity than has Mother Theresa. Gotta love it.

Ghouls and slugs,
Matt

P.S.
I'll try to post with more frequency in the future

M.