Drexel Burnham Lambert

THE JUNK BOND kingdom of financier Michael Milken, of Drexel Burnham Lambert, was raking in[Page 263] enormous profits during the boom of the 1980s. The boom had begun when Drexel offered to buy the telephone company MCI for $1 billion. Within a few years, however, a notorious insider-trading scandal sent Drexel into bankruptcy and Milken to prison. Milken and Drexel had used junk bonds, high-yield bonds issued on high-risk companies, to rescue small companies that were going under because they could not get loans from traditional sources. It was later revealed that Drexel's customers were purchasing both original and secondary securities from one another. Drexel's customers were also being encouraged to buy securities that Drexel felt were crucial to its own success. What appeared to ...