Powerful little book sets record straight on Milken

December 20, 1992|By Hiawatha Bray | Hiawatha Bray,Knight-Ridder News Service



Benjamin J. Stein.

Simon & Schuster.

221 pages. $23.

Years after his fall, rivers of ink still ooze from the body of Michael Milken, the imprisoned financier who made junk bonds part of the language of the 1980s.

No surprise. Milken is sexy, in the way only a multibillionaire convict can be. In our mammon-worshiping land, some people find it almost blasphemous that anybody that rich could ever do time.

Vanity Fair writer Jesse Kornbluth set this tone in his recent book on Milken, "Highly Confident," an entertaining volume that depicts Milken as a misunderstood genius brought low by a scalp-hunting posse of federal prosecutors. Along the way, Mr. Kornbluth pauses long enough to savage financial writer Ben Stein, one of the first to smell a rat in Milken's junk bond business.

Well, it's Mr. Stein's turn, and he's quite able to defend himself. "A License to Steal" is one of the most scathing books yet written on the junk bond business.

Mr. Stein spends little time peering into the souls of Milken and his associates. He doesn't even bother much to defend himself against Mr. Kornbluth, dismissing him in a few contemptuous paragraphs.

Instead, Mr. Stein, an economist and attorney, confines himself to a straight forward explanation of how Milken's schemes worked. With savage wit and surprising lucidity, Mr. Stein offers up a short course on the junk bond business that any reader can follow with ease. In the process, he suggests that Milken created the biggest financial fraud in history.

Mr. Stein focuses on aspects of the affair that other writers have mentioned only in passing. For example, he describes how Milken set up a network of like-minded investors to prop up the value of junk bonds by trading the securities among themselves. Men such as savings and loan magnate Charles Keating and Fred Carr of the insurance firm First Executive Corp. relied on junk bonds to raise the titanic sums of capital they needed for acquisitions.

In exchange for Milken's help in selling their junk bonds, these businessmen also heavily invested in junk bonds issued by other firms. The issuers of junk kept trading the stuff among themselves at Milken's behest, thereby artificially inflating the bonds' real value.

Without such actions, Mr. Stein says, the junk bond business would have died aborning. But there were few junk bond skeptics at the height of the craze. With so many in the business becoming multimillionaires overnight, it seemed rude to criticize.

Mr. Stein makes no pretense of objectivity. He despises Milken, and sometimes the fervor leads the author astray. For example, he awards to Milken and his cronies a great deal of the blame for the S&L crisis. But he only briefly mentions the effect of a 1989 federal law that forced S&Ls to sell all their junk bonds. Predictably, this law caused the values of such bonds to plummet, and led to the collapse of a number of thrifts. Besides, many S&Ls were saddled with lousy real estate investments that probably did as much or more to cause their failures.

In addition, this book is not nearly as well documented as Mr. Stewart's or Mr. Kornbluth's. It occasionally cites unnamed sources telling possibly apocryphal stories that set Milken in the worst possible light.

But Mr. Stein backs up his key points well enough to make "A License to Steal" impossible to dismiss. From now on, the defenders of Michael Milken will have to confront this nasty, powerful little book.

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