Payback

January 2, 1995
Junk-bond pioneer Michael Milken, who was convicted in 1990 of unlawful stock transactions and spent two years in prison, actually committed no crimes at all, contends Fischel, a University of Chicago economist and consultant whose clients have included Milken and other Wall Street figures. The 1980s' wave of hostile takeovers and leveraged buyouts that was spearheaded by Milken made his now defunct firm, Drexel Burnham Lambert, the most profitable investment bank. In Fischel's provocative analysis, such old-line Wall Street firms as Lazard Freres, Salomon Brothers and Dillon, Read, thirsting for revenge and eager to restore their diminished positions, joined forces with big labor, which feared a massive loss of jobs, to instigate a government-backed witch hunt that scapegoated Milken and other high-rolling investors such as John Mulheren Jr., Boyd Jefferies and Robert Freeman. In ambitious U.S. Attorney Rudolph Giuliani (now NYC mayor), this coalition found an ally who waged an ill-informed, unscrupulous assault on the junk-bond industry, writes Fischel, who contends that the overzealous government redefined routine, even beneficial trading practices as illegal. This is a remarkable, bound-to-be-controversial reappraisal of the so-called financial revolution of the 1980s.