“Milken got companies to issue risky “junk” bonds, then repackaged and sold them, hiding the riskiness of the final securities, and so was selling them for more than they were worth. Eventually, payments couldn’t be made on the loans, and investors were scr#wed.”
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It was very clear and apparent that he was selling bonds that were considered more risky than the typical premium ones. The volatility was higher as was the returns. People were willing to invest in opportunities and businesses that the old wall-street investors wouldn’t touch.
I don’t blame the ‘87 market drop on him, and don’t blame the S&L problems on him either. In part profits dropped in his world because the lines between Junk and regular bonds were blurred with more people taking advantage of the opportunities and providing pressure as those opportunities were recognized.
But it wasn't proportionate, and the extent of the risk wasn't fully disclosed.