updated 10/04/1989 AT 01:00 AM EDT
•originally published 10/04/1989 AT 01:00 AM EDT
The son of a Los Angeles accountant, Milken was a whiz kid, a Bobby Fischer of finance. While still in his teens, he noted that broad portfolios of high-yield bonds issued by small-and medium-size corporations, though rated as high risks, were on average even safer investments than bonds issued by Fortune 500 firms. What's more, they paid higher interest and often sold at discounts. Gradually he evolved a revolutionary strategy: If he could create a large market in these so-called junk bonds, he could assemble vast sums of money and use them to build an economic empire. Milken pursued his grandiose scheme as a rising rocket in Drexel Burnham Lambert's bond division. A Niagara of energy, he slept four hours a night and from 4:30 A.M. to 8 P.M. sat nailed to his chair making deals. By 1980 he was the world authority on junk bonds, an electrifying zealot who rapidly persuaded the Street that he was a combination of J.P. Morgan and Obi-Wan Kenobi. "Someone like Mike," a colleague said in awe, "comes along once every 500 years."
Great captains of industry lined up outside Milken's L. A. office like vassals in the antechamber of a king, and like a king, Milken dispensed largess. He financed hundreds of new companies and growth industries (MCI, CNN, Metromedia, regional airlines, cable TV). But as his plans unfolded, his power became alarming. A piratical coterie of corporate raiders, backed with Milken billions, captured some of America's largest companies. Nelson Peltz swallowed National Can, Carl Icahn snared TWA, Ron Perelman pocketed Revlon, Henry Kravis snapped up Beatrice. Even when their attacks were repulsed, the raiders made millions in greenmail, and Milken generated colossal commissions. By 1987 he was a billionaire.
A curious billionaire. He married his childhood sweetheart and lived with her and their three children in a plain two-story house in a middle-class L.A. suburb. Money to Milken was like paint to Picasso—it was the medium he worked in. What mattered was the creative act, the dangerous beauty of the game of power. Immersed in the game, he failed to detect a Judas at his table. In 1986 the feds got the goods on one of his robber barons, a glitzy arbitrageur named Ivan Boesky, who in return for a $100 million fine and a trivial sentence betrayed the king. As the decade ends, Milken faces a punishing trial and possibly jail. His empire has crumbled, but his troops remain loyal. "They should find Mike guilty," said one aide when the case broke, "and make him Secretary of the Treasury.''