On Wed, 24 Jan 2001, Doug Henwood wrote:
> I'm still waiting for someone to explain to me who exactly the victims
> were of Milken's crimes. Not in the moral or figurative sense but in
> the legal sense.
So what do you think of the argument that Ben Stein (of Win Ben Stein's Money) made in Barron's in the late 80s? He argued that what made Milken such a huge criminal was he created the junk bond market out of nothing, and that it was all smoke and mirrors. As I remember it, Stein said that Milken argued that up until him, investors had under-priced junk bonds because they figured on a 4% average default rate, whereas, if you had a large enough portfolio of them -- and if someone like him was around to produce a large enough supply to make such portfolios possible -- then the default rate was only 2%. So there were huge amounts of money waiting to be made. Except, Stein argued, it wasn't true. When the smoke cleared, the default rate was 4%, just like everyone had always thought. But, Stein continued, this wasn't mere hype, like a normal bubble. Rather what underlay it was a concerted effort of triangular and pyramidal trading, all of it illegal, whereby (a) huge returns were generated by insider operations to bid up each other's bonds, and (b) S&L's and companies that would have gone under at key moments and collapsed the market were propped up by similarly illegal interventions. Essentially, according to Stein, Milken didn't invent a market so much as create an incredibly huge Ponzi scheme that took the entire S&L industry down with it. And he sustained that scheme through numerous challenging times by a serial financial criminality that made the final loss bigger by orders of 10. So that in the end, if we roughly estimate the cost to the taxpayers of the S&L bailout at $150 billion, and the population of the US at 300 million, he basically stole $500 from every man woman and child in the US.
Does that argument hold water? If it does, I'd have to say it would make Milken stand out even among crooks just for hugeness of conception. It may not make him the worst person that ever lived. But you need more than not being the worst to be worthy of a pardon.
A pardon sends the message that what you did wasn't a crime, or that you personally are beyond the law. So far I really can't imagine how it might somehow send the opposite message, that the person who received it is still a crook and so is everyone else. Can you think of an example?
Michael
__________________________________________________________________________ Michael Pollak................New York City..............mpollak at panix.com