MARY LOUISE KELLY, HOST:
One of the people pardoned by President Trump yesterday is something of a Wall Street legend - Michael Milken. He is one of the few major financiers ever to serve prison time, but he has so thoroughly revamped his image that young traders today are likely to hear him spoken of as a hero and never even know about the prison part. That is, until this pardon reminded us both of his innovations and his crimes. Mary Childs with NPR's Planet Money podcast has covered Milken over the years. She's with me now.
MARY CHILDS, BYLINE: Hi.
KELLY: So I often hear Milken referred to as the junk bond king. What does that mean? And what else do we need to know about him?
CHILDS: Yeah, so he's very famous, as you say, for inventing what's known as the junk bond market. And this was in the late '70s and early '80s. He basically figured out a way to lend to really risky companies that were, at the time, shut out from normal financing markets. Maybe they were smaller or their industries were frowned upon, whatever the reason. And this really changed Wall Street and who had access to big money. So all these smaller, riskier companies suddenly could grow.
KELLY: And the junk bond - it led to many of these companies being able to grow suddenly really, really fast. Whole sectors of the economy sprang up because of this.
CHILDS: That's right. So cable TV is a big one. Ted Turner behind CNN - he raised money like this. Rupert Murdoch behind Fox News and News Corp - he did this, too. Early cellphone companies, Steve Wynn and his whole casino empire - also funded this way.
KELLY: So what happened with the arrest? This is the late 1980s. What is it Milken did?
CHILDS: So what he did wrong was in the '80s - in the 1980s, he was working at Drexel Burnham Lambert, an investment bank, and the U.S. government started this huge inquiry into Wall Street. They were poking around Milken's new ways to invest, his new deals, his - all of his trading. And a lot of that ran very close to the line of securities fraud and sometimes crossed it. And Milken was indicted on more than 90 charges. He ended up pleading guilty to six felonies, including fraud and conspiracy, basically using his company to help clients hide money to avoid taxes or regulations. He went to prison for about two years and was banned from securities trading for life. But within finance, his reputation has remained basically untarnished. Everyone still absolutely loves him because they see him as this genius who created an entirely new market and also maybe in part because his inventions made them a lot of money.
KELLY: Another thing to know about him - and this is relevant because the White House cited it in issuing the pardon yesterday - is after he came out of prison, he became very, very involved in philanthropy and giving all that money away.
CHILDS: That's right. So right after he got out of prison, he started really focusing on giving away all of his money. He was donating - and still is - hundreds of millions of dollars to fund medical research and education. And he really built this image as a great philanthropist. And he created the Milken Institute, too, which has this huge conference every year in LA. And it's this giant - like, everybody is there. It takes over the Beverly Hilton. All these prominent speakers from Ivanka Trump to Eric Schmidt show up and the heads of every money management firm. Like, everybody who matters in finance is there. And so if you pair kind of this investing in relationships with his foundation donations, he essentially bought a new image. And all of those old friends from Wall Street, they in turn lobbied Trump for this official exoneration, and it worked.
KELLY: That's Mary Childs, one of the hosts of NPR's Planet Money podcast.
Thank you, Mary.
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