Publishers Weekly
By revealing the full scope of the damage that Michael Milken's junk-bond empire inflicted on the U.S. economy, Stein ( Financial Passages ) forcefully refutes the notion that Milken's scam increased national productivity. This concise, punchy expose is the best and clearest guide yet to the workings of Milken's money machine. Stein, an economist and lawyer who reported on Milken for Barron's, shows that insider trading was merely a lucrative sideshow for the Milken team at Drexel Burnham Lambert. Milken, he states, also earned millions by churning (trading clients' accounts to increase commissions), by ``sucking the blood of captive S & Ls like a vampire'' and by taking a hefty cut of the greenmail paid by besieged companies to Drexel-backed corporate raiders. The Securities and Exchange Commission knew in the early 1980s of Milken's stupendous price fixing but did nothing, a lapse Stein blames on Reagan-appointed SEC officials. He also shows how the Milken claque rallied moguls, accountants, the Harvard Business School and the New York Times to its cause. (Nov.)
Library Journal
Milken is the corporate villain America loves to hate. Unlike Jesse Kornbluth, who was sympathetic toward the former junk bond king in his recent Highly Confident , Stein wastes no time in going for the jugular. He feels that Milken was very much in charge of the Drexel Burnham Lambert junk bond operation in its heyday in the 1980s and knew that he was selling a product that was based on deeply flawed financial analysis. By misrepresenting the bonds' default rates, he was in effect creating a classic Ponzi scheme, resulting in losses of billions of dollars not only for Drexel clients but also for insurance companies and savings and loans (S&Ls) that had bought junk bonds for their investment portfolios. As a result, many of these institutions were driven into insolvency, leading to the federal bailout of the S&Ls. If current headlines are any indication, this sad scenario will be with us for years to come. A topical addition for all business collections.-- Richard Drezen, Merrill Lynch Lib., New York
BookList
Michael Milken sold some $200 billion in junk bonds on the false argument that the bonds' higher interest rates more than compensated for their excessive risk and that they were not much more likely to default than investment-grade bonds. The way economist, attorney, and financial journalist Stein reconstructs the development of Milken's empire, Milken began by arranging "inter-frat-house (junk bond) trading" for aggressive money men like Riklis, Lindner, Posner, Steinberg, and Tisch. Then he expanded this smoke-and-mirrors market for junk bonds by overfunding clients' bond issues. He created new companies for clients like Kinder Care financial services through mergers and acquisitions and gained access to "other people's money" through ownership or investment control of insurance companies, S&L's, and pension funds. Stein indicts academia, bond-rating agencies, government regulators, and the business press for allowing Milken's money machine to operate so long at the expense of other bondholders and stockholders, insurance policyholders, pension-plan beneficiaries, S&L depositors and ultimately U.S. taxpayers. With Milken due for release from prison next year and the debate about his "innovative" investment practices unresolved, "A License to Steal" makes a solid, well-written case that Milken's remarkable financial games created far more losers than winners in the U.S. economy. Expect requests.
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