Micheal Milken: The Junk Bond King

Micheal Milken was only in his 20s at graduate school when he came up with the idea which would revolutionize the world of finance, and change it forever. Milken had discovered the great potential in what is called a "Junk bond". But what are Junk bonds? Junk bonds, also known as high-yield bonds, are bonds that are rated below investment grade. The bonds are rated lowly because they have a very high risk of default, but with this risk comes a much higher profit, if said bond is successful.

After Milken graduated, he joined a small investment firm called Drexel Burnham Lambert. After gaining some influence within the company, Milken proposed the idea of persuading smaller companies to create junk bonds which would be underwritten by Drexel Burnham. Once this was accomplished, Milken took it to the next level by using the securities he acquired from underwriting the junk bonds, to finance the takeovers of numerous corporate raiders, such as T. Boone Pickens, and the investment firm, Texas Pacific Group. This tactic proved to be so successful that Milken was given the nickname "The Junk Bond King". Under Milken's supervision, Drexel Burnham grew to be one of the most powerful firms in Finance.

But even after all of this success, Milken wasn't satisfied. He began committing many white-collar crimes along with fellow finance genius Ivan Boesky. Milken would supply Boesky with capital and insider information, which Boesky would use to manipulate takeover bids and stocks. While this created a lot of wealth for the men, it came to an end when Boesky was charged with insider trading. Boesky settled for a plea deal in which he would have to pay a whopping 100 million dollars in fines along with becoming an informant. This was bad news for Milken as Boesky exposed the crimes both men had committed. This led to a rabbit hole in which many more crimes of Milken were exposed. Milken was charged with racketeering and securities fraud and fined a total of 600 million dollars. He was also sentenced to 10 years in jail but only ended up in jail for 2.

Despite his 600 million dollar loss, Milken still had a fortune, which he used to fund the Milken Family Foundation which worked with hundreds of philanthropist groups around the world. Now Milken participates in many non-profit organizations and has changed his image from Wall Street's biggest crook to a former criminal who has arguably more than repaid the bad he has done with good.


Sources:
http://www.sechistorical.org/museum/galleries/wwr/wwr05d-markets-milken.php
https://money.howstuffworks.com/personal-finance/financial-planning/junk-bond1.htm
https://www.investopedia.com/terms/h/high_yield_bond.asp
https://www.investopedia.com/terms/m/michaelmilken.asp
https://www.businessinsider.com/michael-milken-life-story-2017-5