I love old video footage. I found this gem on YouTube. I was actually looking for footage of Ivan Boesky’s “greed speech.” If you’re not familiar with it, Boesky was speaking at Berkeley, and said, “I think greed is healthy. You can be greedy and still feel good about yourself.” This is reportedly the origin of Gordon Gekko’s “greed is good” speech in the movie Wall Street (#3 on our Best Business Movies list). Gekko was inspired by pieces of Boesky, Michael Milken and Carl Icahn.
If you don’t know the story above already, Michael Milken didn’t invent junk bonds, but he made them popular as a method of financing. His firm, Drexel Burnham Lambert, was pretty much the only firm dealing in junk bonds in the 1980s. The emergence of the leveraged buy-out made him and his firm incredibly important of this era of business.
If you don’t know what a leveraged buyout, it’s essentially using financing to make a tender offer for a company. That financing occurs with the use of junk bonds (very high risk, high yield bonds). People would come to Milken and get a letter saying Drexel would finance the acquisition they were interested in. The buyers would then take that letter to the Board of Directors of the company they were interested in buying. Such a purchase would typically eject the officers and directors from their cushy jobs at the top of the company. To avoid this, the board would often offer to pay the acquirer not to acquire them. This was cleverly called green mail. (If you don’t think it still happens, check out what Carl Icahn did recently with Yahoo).
Boesky was arrested for trading on insider information. He then cooperated with authorities to bring down Milken. Interestingly, the video above predicts that Milken and Co. could serve up to 755 years in prison. In reality, he spent less than two years in prison. According to Forbes, he’s worth over $2.5 billion. Just like in the fairy tales, I guess. Just thought I’d share the video. Thanks for reading.
No related posts.
Related posts brought to you by Yet Another Related Posts Plugin.
