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The three-hour difference in time zones enables Milken, a workaholic of legendary proportions, to stay in touch with buyers and sellers on both coasts. What, then, did Milken plead? Unlike slower-changing industries like supermarkets, which can appropriately assemble a balance sheet with more debt, technology is an inherently risky business and needs a strong balance sheet to survive. Safeway is a company with , employees in almost 1, stores across the U. Milken’s impact on the economy.

So the department managed to coerce Milken to plead guilty to trivial offenses. Much has been made of Milken’s brief and sporadic contacts with the notorious Ivan Boesky. As is so often the case with federal criminal prosecutions, the fabrication consisted, in part, of dubious testimony given by rewarded witnesses, and felony charges for conduct admitted to by Milken that, to informed and objective observers, did not appear to constitute crimes. A common error often repeated in the press is that Milken was a financier who “turned to” philanthropy. Finally, the national media is an often overlooked actor in the Drexel story, when in fact it played a significant role that defined the tone of the case. Alvin Toffler, the futurist and author of Future Shock , summarized the entire Milken phenomenon of success and retribution in his book PowerShift:. Institutional Scholarship What Went Wrong:

The myth that Mike’s main philanthropic concern is prostate cancer probably got started because of press reports about his diagnosis with that specific disease.

What Went Wrong: An Examination of Drexel Burnham Lambert’s Descent into Bankruptcy

The SEC simply fined 98 brokerage firms and banks for Milken-like technical reporting violations. Culture, fiction and Milken When Milken became a philanthropist: He originally faced a count indictment including insider trading chargeswhich the Justice Department knew would not stick.

The choice of capital structure can significantly affect the valuation of a company and its risk as an investment. Over the decades sinceMilken has given away the overwhelming majority of his wealth in pursuit of his many philanthropic initiatives. Insurance companies also saw Milken’s innovations as a threat because they were generally required by regulators to carry only investment-grade securities.


Toys-R-Us, Mattel and Hasbro.

Junk Bond Financing and Financiers

This led to enormous job creation by the By the mid ‘s Milken had become the most michxel financier on Wall Street, his high-yield bonds had ignited an American business revolution, and the firm, now known as Drexel Burnham Lambert, was launched to the apex of American finance. At this peak, ironically, Milken said he felt “powerless” after learning that his father’s cancer was terminal – a fact that accelerated his involvement in medical research and prevention initiatives.

Milken has advocated a sound capital structure – the relative levels of equity and debt on corporate balance sheets – throughout his career.

The period from the lates to the mids generally favored debt financing. Mike was one of the great investment bankers of the s. Both also had powerful allies in government and the media. Given the breadth of Milken’s activities before and after the flurry of media attention to his Wall Street career, it’s a phrase that overlooks four decades of leadership in medical-research and public health advocacy, not to mention Milken’s pioneering use of complex capital-structure strategies involving equity-based financial instruments and other securities.

By this measure, the Ebbers case is more than 34, times bigger than Milken’s. In the late s, Milken, now a year-old senior vice-president, demonstrated in his MBA thesis for the University of Pennsylvania’s Wharton School that companies with debt rated B or less were far less prone to bankruptcy than most people had assumed.

Despite some obvious ties between the civil and criminal investigations and the firm’s failure, the crimes alone do not tell the story of the Drexel’s demise.

He formalized his individual efforts in early when he was relatively unknown to the general public with the formation of the Milken Family Foundation, which was endowed with several hundred million dollars. Milken showed it was possible to align the interests of all corporate stakeholders – investors, entrepreneurs, debtors, creditors, consumers, management, thesus and society – to create jobs, wealth and economic growth.


Philip Leder, a pioneer in molecular biology who contributed to the deciphering of the genetic code; Dr. The research departments of virtually every brokerage firm were focused on stocks and did little or no research on bonds and other types of debt.

But time is the greatest competitor.

In a September Financial Wgarton column, Norman Barry, professor of social and political theory at the University of Buckingham, wrote:. Milken’s financial revolution helped build this nation’s current industrial and commercial infrastructure. Inhe said, “I never thought we’d see an opportunity like again, but here it is. This ignores miilken fact that his philanthropy started two decades before he was diagnosed with cancer in In the Late s, Michael Milken, a brilliant graduate of the University of Pennsylvania’s Wharton School, took some obscure research on the performance of high-yield bonds to a small, second tier Wall Street firm named Drexel Firestone.

It is unrelated to his previous work on Wall Street.

michael milken wharton thesis

The key was his profound understanding of capital structure and how it must change as exogenous conditions change. On the contrary, the fictional Gekko character is based on Ivan Boesky, who in a famous speech at the Wharyon of California, Berkeley, said, “I think greed is healthy.

Nevada, one of the fastest-growing states in the nation, had its economy kick-started when Milken michale its casinos, newspapers and homebuilders. Both had every reason to destroy him if they could.

michael milken wharton thesis

Steven Rosenberg, who reported a major breakthrough in the development of successful gene therapy that for the first time in history harnesses the body’s whrton immune system to shrink tumors; Dr.