Customer Reviews

Payback: The Conspiracy to Destroy Michael Milken and His Financial Revolution

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Mr. Fischel does an excellent job explaining what exactly happened with high-yield financing by Drexel Burham Lambert (Milken) in the 1980's. The book also goes into great detail about how Milkens financing of raiders helped evict the "entrenched" risk averse management of many US companies. These managers filled with anger and evny, join with their former college buddies (such as Nick Brady) to form an unholy alliance and stop Milken, Pickens, Icahn and their ilk. Mr. Fischel also describes in great detail of how a zealous prosectuor named Guiliani stopped at nothing to get Milken, et. al so he could boost his chances at the 1989 mayoral race in NYC. Fischel also speaks of some anti-semitism that might have been behind this. The book doesn't make apologies for most of what transpired on Wall St. in this era. Fischel declares Boesky and Levine to be "crooks" and shows no quarter when it comes to any of the other thieves who profited from insider trading. However, he justifies what Milken did to improve the US economy both then and now. The book also talks about Keating and the S&L problem. A great book, I couldn't put it down!!!

Payback - the conspiracy to destroy Michael Milken and his financial revolution is an outstanding book that changes your way of thinking about the american dream, the junk bond decade and I recommend it unconditionally to anyone who is willing to have a lot of conventional wisdom and preconceived ideas turned around.

The author starts with a strange question - is there something like too much wealth ? Is it embarassing to earn too much money in a short period of time. Is there something like if you are born like this you must utmost become that ?

This book is a story about a man who I believe was on the way to become the most important financial thinker in our 20th century, a man whou should be seen as a scholar more than as a businessman, in particular because he prooved what scholars before him erected as a hypothesis.

His crime: working unnormally long hours, thinking the impossible paths of financing, not considering the estalished rights of normal banks (which would after him cease to exist) and not bending over to the politicians who turned an industry, that should have been killed in the early 80s into a nightmare of dimensions never heard of before. Milken just helped to open ways to a new wave of shareholder- value-oriented management, and he helped to get the best result out of the S&L legislation, in principle just the way the politicians wanted it - only that they wanted to reverse everything after they had seen what had gone completely wrong,much too late at a much too high cost.

I admit I have always liked Mr Michael Milken, already in the late 80s, when he was convicted, beacause the accusations seemed not plausible. This book shows, that he was sentenced to 3 years in prison (not 10 as one so often reads) for a crime that n-o-b-o-d-y can commit, because it is not a crime. It was just an accusation and a judge who lost control over the PR-work of a selfish State attorney Ralph Guliani. I admit that since reading the book I also admire Mr Milken for his proof, what a man, his wife and chidren can endure.

Read this book just to show reverence to a great man of history who will never surrender, be it to unjustified accusations or to death in form of cancer, and to whom scholars in the next century will look as a magnificent thinker of the last century.

Dr. Rudolf C. King

This book describes eloquently how Michael Milken and the junk bond market that he pioneered in the US created wealth despite all the populist reports to the contrary. Fischel shows how high yield bonds led to a huge increase in share holder wealth and to productivity gains in American companies - gains that eventually made these companies world beaters in the 90's. This market, however, was destroyed by over zealous regulators who frequently disregarded the civil liberties of junk bond practitioners and in particular Michael Milken. Indeed, Fischel compares the prosecution of Milken and his cohorts to the McCarthy era excesses of the fifties; and he makes a convincing case. Many of the so called "crimes" to which Milken pled guilty were technical violations and they may not have even been that. The author shows how Milken compromised in the face of continual and unscrupulous government and press harrasment. Despite his compromise, and the nebulous nature of his "crimes" he was sent to prison. In short, Milken was ruthlessly made a scapegoat for "the decade of greed"; his real crime being that he had made a fortune. Milken was certainly not the only victim, however. Those who worked in this market often came from outside the blue blood financial establishment and were resented for it. Lisa Jones, for example, was a teenage runaway who had made something of her life against all odds. She served a prison sentence for allegedly perjuring herself in a description of events that the courts eventually found were not a crime. In short, the assualt on the Junk bond market was a victory for establishment insiders over energetic and innovative outsiders. While it is upsetting that a well-functioning and efficient market was severley disrupted and nearly closed down. This is not the most disturbing aspect of the book. The most disturbing aspect is the illustration of how individual liberties were given such short shrift in the pursuit of populist goals. The American constitution was designed to protect the unpopular, but Fischel shows how it failed to protect Milken and others. This book provides an excellent description of some parts of the US finacial markets and so it is on reading lists in economics and business departments in universities as far afield as South Africa. However, it should also be put on reading lists by law, sociology and politics departments as an example of how the government can get you, if it wants you. If there is a criticism of the book, it is that some of the explanations are a bit long winded. But these can be skipped, and so there is no doubt that anyone interested in financial markets or civil liberties should buy this book.

Finally a book written by someone who understands capital markets as opposed to journalists-turned-financial experts (e.g., "Predators Ball"), catering to popular sentiment (it's book sales, stupid!) and demonstrating astonishing financial naivity. Professor Fischel's account of Milken's financial innovation may never score big with general public, but it is a must-read for all finance practitioners and, hopefully, government officials, including NYC mayor.

I found this book to be very informative on the rise and fall of Michael Milken as well as on the general regulatory responses to the various financial "crises" of the 1980's.

First of all, the author is a professor of law and business at the University of Chicago who is very sympathetic to laissez-faire economics. Although the writing can be a little repetitive and overly detailed at times, I, as a graduate student of engineering, still found the style of writing very enjoyable. If you know a little bit about free market economics and a little bit about investing then you should find this book very accessible.

Second of all, this book offers a compelling defense of Michael Milken. If only Daniel Fischel was his defense attorney! Fischel persuasively argue that the charges against Michael Milken were incredibly vague and the laws used were highly subjective. Furthermore, the author also argues how there was a lot of national sentiment to vilify a Wall Street tycoon, such as Michael Milken, in response to the recent market downturn. Unfortunately, instead of viewing sudden declines in market prices as a consequence of overvalued securities, many individuals find it much more emotionally satisfying to blame a successful stock speculator for their losses, regardless of if the stock trader actually did anything wrong.

Further still, Fischel reveals how truly productive Michael Milken was. Milken greatly expanded the use of high-yield (viciously called "junk") bonds in corporate finance and mergers and acquisitions, which in turn revolutionized corporate restructuring.

Book is of great relevance today. From reading this book, you will learn of the emotionally-driven demands for the Federal government to respond to dips in the financial market. In response to the Savings and Loans crisis, Congress passed the Financial Institutions Reform Recovery and Enforcement Act of 1989 (FIRREA), which essentially created a government-backed oligopoly of bond credit agencies (i.e., S&P, Moody's and Fitch.) Note that these are the very same ratings agencies who are currently being blamed for the subprime housing crisis today.

This book is also of great relevance for the 2008 presidential primaries. First, Senator Barack Obama is calling for "21st century regulations" of stock speculators. Reading the regulatory responses in this book offers a very recent parallel to today's debate. Second, you will read about Senator John McCain's membership in the "Keating Five", a group of five legislators accused of improperly aiding Charles Keating, the colorful chairman of a failed Savings and Loan.

The most chilling chapter is the one that focuses on Rudy Giuliani as the relentless prosecutor of Michael Milken. Rudy Giuliani is portrayed as a ruthless attorney who will stop at nothing to incriminate speculators accused of insider trading. Specifically, you will learn about how Giuliani was the first to use the RICO Act, a federal law originally used to prosecute organized crime, for Wall Street traders. If the portrayal of Giuliani in this book is accurate, it is a stark contrast to the Rudy Giuliani of 2008, who campaigned for the Republican nomination while touting the virtues of the free market, especially in health care.

If you are interested in financial economics, the recent history of investing, free market economics or just what really happened with Michael Milken, then I cannot recommend this book more highly.

Michael Milken, so says David Kelley, has done more to help humanity than Mother Teresa ever did (it'd be interesting to hear what Christopher Hitchens has to say about it). He could be right; Milken's ideas about an overlooked "niche" in corporate paper - the region known as "junk" - turned the staid banking industry on its head, and in the process cleaned house in a number of other industries. MCI and McCaw cellular were created with Milken's help, and put an end to the AT&T monopoly; indeed, many people today are disconnecting their wireline phones as they talk on a cell and surf on a cable modem. T. Boone Pickens was able to bring the oil industry to a more rational level after it overbuilt for the 70's oil crisis. Ted Turner took a little TV concern in Atlanta to a nationwide audience, then went on to start CNN, and today the cable industry is far more interesting than the Big 3 networks.

In the process, Milken made many powerful enemies, who eventually turned to the federal government, and an ambitious prosecutor by the name of Rudolf Giuliani (who wanted to become Mayor of NY, NY) to pay Milken back. Milken's marketable and profitable bonds were known as junk because Standard & Poor's and Moody's services often overlook talent and entrepreneurial vigor in favor of longevity. It was only government interference in the market in the late 80's that brought down the market (by such atrocities as FIRREA); this fact did not stop critics of Savings and Loans from blaming Milken for that fiasco. Fischel explains the major S&L trials, as well as the Milken trial, and finds the government guilty of propping up an industry that was insolvent by 1980, made no sense after Congress bailed it out, and ultimately cost taxpayers more than if Congress had merely let it die in 1980.

Still, the conspiratorial tone is a little much, and Fischel accepts a fool's errand in trying to defend people whose names have become euphemisms for greed. People actually think that the Michael Douglass character in Wall Street, Gordon Gekko, was a real person. It would be worth reading Burton Folsom's _Myth of the Robber Barons_ and understand his differentiation between business entrepreneurs and political entrepreneurs before reading _Payback_.

Great book. Very readable. Fischel does an excellent job of explaining how Milken threatened the iron triangle of Big Business, Big Unions, and Big Government.

Watch out when an economist begins talking about law (or, like Posner, a lawyer talking about economics).

Another good book in this general line is Fenton Bailey's "Junk Bond Revolution". Very well written, probably by a ghostwriter.

A useful counterweight to conventional received wisdom, but, keep in mind, that experts are hired mouthpieces, and Alan Greenspan once testified on behalf of Charles Keating.

I bought this book, looking for a history of Drexel and Milken, and what they did, and what junk bonds were.

I found a defense of Drexel and Milken, and a rebuttal of the charges against them.

Most of the book is a description of their trials, and how they defended, and how the charges were 'put up' by attorney Guilani.

But, I think the book went too far in the last 100 pages. Having run out of things to say about Drexel and Milken, the author diverted his attention to the Savings & Loan scandal, and has the gall to defend Charles Keating, and then go on to defend other S&L 'criminals'. What this has to do with Milken or Drexel is beyond me, and thus only the first 2/3rds of the book lives up to its title.

Also, he never concretes the evidence that there is a conspiracy, only that a top guy in government (who is jealous of Drexel), and Ralph Guilani, (not to mention the government's policies) are against Drexel.