Michael Milken

Lore & Background

Milken was born into a middle-class Jewish family in Encino, California. He graduated from Birmingham High School, where he was head cheerleader and worked at a diner. He earned a BS with highest honors from the University of California, Berkeley, was elected to Phi Beta Kappa, and was a member of Sigma Alpha Mu fraternity. He then received an MBA from the Wharton School of the University of Pennsylvania. At Berkeley, he was influenced by credit studies by W. Braddock Hickman, who noted that a portfolio of non-investment grade bonds offered risk-adjusted returns greater than investment-grade portfolios.

Through Wharton professors, Milken landed a summer job at Drexel Harriman Ripley in 1969. After completing his MBA, he joined Drexel Firestone as director of low-grade bond research and was given control of some capital to trade. Over 17 years, he had only four down months. After Drexel merged with Burnham and Company in 1973, Milken became head of convertibles and persuaded his boss to let him start a high-yield bond trading department, which soon earned a 100 percent return on investment. By 1976, his income was estimated at $5 million a year. In 1978, he moved the high-yield bond operation to Century City in Los Angeles.

Milken's network of high-yield bond buyers enabled him to raise large amounts of money quickly, facilitating leveraged buyout firms and greenmailers. Drexel's 'highly confident letter' promised to raise necessary debt, and though it carried no legal status, Milken's reputation made it reliable. Milken was indicted in 1989, pleaded guilty to securities and reporting violations, and was sentenced to ten years in prison, fined $600 million (his website says $200 million), and barred from the securities industry. His sentence was reduced to two years for cooperating with testimony against former colleagues and for good behavior. He was pardoned by President Donald Trump in February 2020.

Reader's Guide

Michael Milken's significance lies in his transformation of the high-yield bond market, which enabled capital to flow to companies and transactions previously considered too risky. His work facilitated leveraged buyouts and corporate restructuring, influencing the financial landscape of the 1980s. Supporters credit him with driving economic growth by redirecting capital from old-line businesses to new markets. However, his career was marked by scandal: he was convicted for securities law violations, and his methods—including the use of 'highly confident letters' and alleged markup abuses—drew intense scrutiny. The debate over his legacy persists: some view him as a visionary financier who democratized capital, while others see him as a symbol of 1980s excess and rule-breaking. His later philanthropic work, including co-founding the Milken Family Foundation and funding medical research, adds a complex layer to his public image. His pardon in 2020 remains a subject of discussion.

Did You Know?

• Milken's compensation while head of the high-yield bond department at Drexel Burnham Lambert exceeded $1 billion over a four-year period, a record for U.S. income at that time.
• He was sentenced to ten years in prison and fined $600 million (though his personal website claims $200 million) for securities and reporting violations.
• Milken was pardoned by President Donald Trump in February 2020.
• He co-founded the Milken Family Foundation and is a prostate cancer survivor who has devoted significant resources to research on the disease.

Notable Quotes (Wikiquote)

"Michael Milken is an American investor and financier, known for his association with the junk bond market in the 1980s as well as for his conviction on federal securities laws." — Michael Milken "People are the scarce resource. It's not buildings, it's not printing presses, and it's not factories that are the scarce resource." — Michael Milken