The high-yield bond department at Drexel Burnham Lambert, managed by Michael Milken during the late 1980s, generated more than $1 billion in compensation for him over four years. This figure established a record for U.S. personal income at the time and cemented his role in creating the market for junk bonds.
Early Education and Academic Influence
Born in 1946 in Encino, California, Michael Milken attended Birmingham High School. He later graduated with highest honors from the University of California, Berkeley in 1968, where he was elected to the Phi Beta Kappa Society and participated in the Sigma Alpha Mu fraternity. While at Berkeley, he studied credit research authored by W. Braddock Hickman, which suggested that non-investment grade bond portfolios provided superior risk-adjusted returns. He completed his MBA at The Wharton School of the University of Pennsylvania.
Career at Drexel
In 1969, Milken began working at the investment bank Drexel Harriman Ripley. Following his graduate studies, he joined the firm as a director of low-grade bond research. In 1973, when Drexel merged with Burnham and Company, Milken became head of convertibles. He convinced the firm's leadership to launch a dedicated high-yield bond trading department. In 1978, he relocated this operation to Century City in Los Angeles.
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By the mid-1980s, Milken facilitated large-scale capital raises for leveraged buyout firms and other entities using high-yield debt. These deals frequently relied on 'highly confident letters' issued by Drexel, promising that financing would be secured. Following an investigation into insider trading and racketeering, Milken was indicted in 1989. He reached a plea bargain in which he pleaded guilty to securities and reporting violations. He received a ten-year sentence, which was later reduced to two years. In February 2020, he received a presidential pardon from Donald Trump.
Philanthropy and Later Ventures
After his time at Drexel, Milken engaged in various business and charitable activities. In 1996, he and his brother Lowell founded Knowledge Universe, a firm that included the child care provider Knowledge Learning Corporation. Milken also invested in K12 Inc., a provider of online schooling. As a prostate cancer survivor, he has funded medical research into melanoma and other diseases through the Milken Family Foundation and the Milken Institute.
Fast facts
- Born: 1946, Encino
- Education: Birmingham High School, UC Berkeley, The Wharton School
- Profession: Banker, financier
- Key Role: High-yield bond department head at Drexel Burnham Lambert
- Legal Outcome: Convicted of securities and reporting violations in 1989
- Pardon: Granted by President Donald Trump in February 2020
- Awards: Ig Nobel Prize (1991)
- Philanthropy: Founder of medical research foundations
Questions readers ask
What led to Milken's criminal conviction?
He pleaded guilty to securities and reporting violations following a 1989 indictment for insider trading and racketeering.
What is the origin of his nickname?
He is known for his role in developing the high-yield bond market, earning him the title of the Junk Bond King.
What philanthropic work is he associated with?
He focuses on funding research for prostate cancer, melanoma, and other life-threatening illnesses.
Achievements
- Ig Nobel Prize — 1991
- Educated at University of California, Berkeley and The Wharton School
