Each day, Benzinga will take a look back at a notable market-related moment that happened on this date.
What Happened? On Dec. 21, 1988, Drexel Burnham Lambert bond high-yield bond guru Michael Milken pled guilty to six counts of stock parking and stock manipulation.
Where Was The Market? The S&P 500 was trading at 277.38 and the Dow Jones Industrial Average was trading at 2164.64.
What Else Was Going On In The World? In 1988, the Morris worm was one of the first computer viruses distributed on the early internet. The movie “Rain Man” was the top box office hit of the year.
The Downfall Of Drexel Burnham Lambert: In the 1980s, Drexel Burnam Lambert was a major American banking institution, having been established back in 1935. At its peak, the firm was the fifth-largest investment bank in the U.S. thanks to junk bond market expert Michael Milken.
Under Milken’s leadership, Drexel drove the junk bond market to its most profitable year in history in 1986. In 1987, Milken was paid $550 million for his services. One year later, Milken was in court pleading guilty to multiple counts of securities fraud.
Wall Street Crime And Punishment: Michael Milken, The Dethroned Junk Bond King
Milken was later indicted and charged with 98 counts of racketeering and fraud. He was ultimately forced to pay fines and settlements totaling $1.1 billion and serve 22 months in prison for his crimes.
The junk bond scandal ultimately took down Drexel entirely. The company officially declared bankruptcy in 1990. Drexel and Milken played a huge role in the expansion of the junk bond market, which is now $1.5 trillion in size globally.
Photo: Charlie Rose interview, CBS
