Michael Milken: Philanthropist, Chair of Miliken Institute

Michael Milken is a billionaire financier best known as the man behind the junk bond boom of the late 1970s and 1980s. Milken found a way to lend money to riskier companies struggling to access credit, leading parts of the economy to boom and Milken to make a fortune.

Greed eventually got the better of Milken and he was sent to prison for securities fraud. Since getting released, the "junk bond king" has remained in the spotlight, this time mainly for his charitable donations and focus on education and medical research.

Early Life and Education

Michael Milken was born on July 4, 1946, in Encino, California. Michael, whose father was an accountant, was said to be reclusive from an early age and reportedly stood out by working harder and longer than his peers. He was head cheerleader of Birmingham High School and went bald in his early teens.

In 1968, Michael earned a bachelor's degree from the University of California, Berkeley. He then pursued an MBA at the University of Pennsylvania.

In 1969, while studying at the University of Pennsylvania’s Wharton School of Finance, Milken joined Drexel Burnham Lambert. Two years later, he became head of the company's bond trading department. Milken would remain with Drexel Burnham Lambert for 17 years, during which he took a keen interest in junk bonds.

Notable Deeds

The Junk Bond King

At Drexel Burnham Lambert, Milken initiated a high-yield bond trading department, an idea that would eventually earn a 100% return on investment. Envisioning a path for investors to garner high returns by buying bonds issued by companies with low credit ratings, Milken helped Drexel Burnham Lambert launch an effort to underwrite junk bonds by convincing companies to issue them.

The bonds provided capital for companies unable to access credit and Milken raised a large amount of money from a sizable base of interested investors. Milken led Drexel Burnham Lambert's lucrative practices of leveraged buy-outs, hostile takeovers, and "junk" bond issues.

Milken's compensation topped $550 million in 1987 and exceeded $1 billion over four years. Milken was nicknamed the "junk bond king" and, at its peak, Drexel Burnham Lambert was one of the largest investment banks in the U.S.

Wall Street leaders pondered how Drexel Burnham Lambert could allow one executive to gain unregulated power. ''Such an extraordinary income inevitably raises questions as to whether there isn't something unbalanced in the way our financial system is working,'' said David Rockefeller, retired chairman of the Chase Manhattan Bank. ''One has to be concerned when the norms that have been accepted over the years suddenly become so distorted.''

Crimes

In 1986, one of Drexel Burnham Lambert's clients, Ivan Boesky, was convicted of insider trading and implicated Milken and Drexel Burnham Lambert in his illegal financial dealings. Two years later, in 1988, Milken and his employer were charged with securities fraud.

In 1990, Milken pleaded guilty to six felony counts of violating securities laws and was sentenced to ten years in prison and fined $600 million. He was also banned for life from the securities industry by the Securities and Exchange Commission (SEC). In that same year, Drexel Burnham Lambert declared bankruptcy.

Milken's sentence was later reduced to two years for good behavior and for cooperating with testimony against former colleagues.

Following his release from prison, Milken worked as a strategic consultant, which violated his probation, and he was subsequently fined. He was pardoned by President Donald Trump in February 2020.

The Bottom Line

Michael Milken is a billionaire and philanthropist mainly known for pioneering the junk bond craze of the 1980s. Nicknamed the "junk bond king," Milken, while working as an executive at the investment bank Drexel Burnham Lambert, became famous for getting companies with lower credit ratings access to capital.

Milken's work turned him into one of Wall Street's highest earners and a symbol of the greed and growth of financial markets in the 1980s. By 1990, he was behind bars for securities fraud.