Letters to the Editor
There's More to Milken
A recent article profiling Michael Milken ("The World According to Milken," March 4) added to the widespread mythology about this complex man but did not clearly convey certain important facts.
It is often assumed, for example, that his impact on American capitalism was confined to the 1980s. In fact, his seminal theories of capital structure and credit once thought revolutionary and now taught in every business school were developed at Berkeley and the Wharton School in the 1960s and implemented as soon as he went to Wall Street in 1969.
As explained at the Web site www.mikemilken.com, these theories anchored the seismic shift in U.S. lending practices between 1974 and 1976, when financial markets emerged from the worst recession since World War II. This is when Milken's revolution in access to capital hastened the historic transition from corporate borrowers' reliance on banking relationships to the more-democratic process of funding through innovative capital market instruments.
By 1976, Milken's success in this endeavor made him independently wealthy, allowing him to launch his career as one of America's top 10 philanthropists. In 1982, he formalized his philanthropic efforts with the founding of the Milken Family Foundation, which was endowed with several hundred million dollars. Yet the press wrote little about him throughout the 1970s and early 1980s. That is perhaps understandable dry stories about philanthropic gifts don't sell many newspapers. Only later, when he made legal missteps that he has acknowledged, did a feeding frenzy of press coverage make him seem to have appeared from nowhere in the later 1980s.
Just as the arc of his life is often distorted, so too are the financial technologies he innovated. Milken employed 50 different types of securities in more than a dozen asset categories to serve the capital needs of his clients. Among the least risky of these in a properly diversified portfolio were high-yield debt instruments, a.k.a. junk bonds.
Finally, the article seems to have been overly shrill in assessing Milken's reference to the potential economic benefit of curing cancer. After a quarter century of involvement in cancer research projects, he often speaks publicly about the human and economic toll of serious diseases. The data cited in the article are derived from work that won the 1992 Nobel Prize in Economics for Prof. Gary Becker. Becker is one of more than 100 distinguished experts who will participate in the Milken Institute's fifth annual Global Conference in Los Angeles next month. Details of this Conference are at www.milkeninstitute.org.
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