Introduction to Michael Milken
Let me tell you about Michael Milken, the billionaire financier who sparked the junk bond boom in the late 1970s and 1980s. He figured out how to lend money to companies that were too risky for traditional credit, creating a massive boom and building his own fortune in the process.
Greed caught up with him, leading to imprisonment for securities fraud. But since his release, the 'junk bond king' has stayed in the public eye, now channeling his energy into charitable donations, education, and medical research.
Key Takeaways
You should know that Michael Milken is a philanthropist and chairs the Milken Institute. He started at Drexel Burnham Lambert in 1969, trading high-yield bonds that earned him his famous nickname. He spent nearly two years in prison for securities fraud but got a full pardon from President Trump in 2020. Post-prison, he's back in the spotlight as a philanthropist leading the Milken Institute.
Early Life and Education
Michael Milken was born on July 4, 1946, in Encino, California. His father was an accountant, and from a young age, Michael was reclusive, known for working harder and longer than anyone else around him. He even served as head cheerleader at Birmingham High School.
In 1968, he earned a bachelor's degree from the University of California, Berkeley, then went on to get an MBA from the University of Pennsylvania. While at Wharton's School of Finance in 1969, he joined Drexel Burnham Lambert. Two years later, he headed their bond trading department and stayed with the firm for 17 years, developing a deep interest in junk bonds.
Notable Deeds: The Junk Bond King
At Drexel Burnham Lambert, Milken set up a high-yield bond trading department that delivered a 100% return on investment. He saw an opportunity for investors to earn big by buying bonds from low-credit-rating companies, and he pushed Drexel to underwrite these junk bonds by persuading companies to issue them.
These bonds gave capital to firms that couldn't get credit otherwise, and Milken pulled in huge sums from eager investors. He drove the firm's profitable strategies in leveraged buyouts, hostile takeovers, and junk bond issuances. In the 1980s, Drexel controlled 70% of the junk bond market. His pay hit $550 million in 1987 and topped $1 billion over four years, making him the 'junk bond king' and elevating Drexel to one of the U.S.'s largest investment banks.
Wall Street bigwigs wondered how one executive could amass such unchecked power. As David Rockefeller, retired chairman of Chase Manhattan Bank, put it: 'Such an extraordinary income inevitably raises questions as to whether there isn't something unbalanced in the way our financial system is working. One has to be concerned when the norms that have been accepted over the years suddenly become so distorted.'
Crimes and Legal Troubles
In 1986, Drexel client Ivan Boesky got convicted of insider trading and dragged Milken and the firm into his schemes. By 1988, Milken and Drexel faced securities fraud charges. In 1990, Milken pleaded guilty to six felony counts of securities law violations, receiving a ten-year sentence and a $600 million fine. The SEC banned him for life from the securities industry, and Drexel went bankrupt that year.
His sentence dropped to two years for good behavior and testifying against colleagues. Fun fact: Gordon Gekko in the 1987 film Wall Street was partly inspired by Milken. After release, he worked as a strategic consultant, violating probation and earning another fine. President Donald Trump pardoned him in February 2020. As of January 29, 2025, his net worth is estimated at $7 billion.
How Did Michael Milken Make His Money?
Milken built his wealth as an investment banker trading securities, primarily through innovating and dominating the junk bond market.
What Does Michael Milken Eat?
After a prostate cancer diagnosis, Milken adopted a clean eating approach. He co-authored books like 'The Taste for Living Cookbook: Mike Milken's Favorite Recipes for Fighting Cancer' with Beth Ginsberg.
What Is Michael Milken Doing Today?
Today, Milken chairs the Milken Foundation, emphasizing education and medical progress. It awards prizes to dedicated K-12 teachers and principals and provides financial aid to students heading to college who need support.
The Bottom Line
In summary, Michael Milken is a billionaire philanthropist best remembered for kickstarting the 1980s junk bond craze. As an executive at Drexel Burnham Lambert, he got lower-credit companies the capital they needed. His efforts made him a top Wall Street earner and an icon of 1980s greed and market expansion. By 1990, he was in prison for securities fraud, but he served just two years and has since turned to philanthropy, capped by a 2020 presidential pardon.
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