The Predators’ Ball: The Junk-Bond Raiders and the Man Who Staked Them
Securities and Exchange Commission v. Drexel Burnham Lambert Incorporated, Drexel Burnham Lambert Group Incorporated, Michael Milken, Lowell Milken, Cary Maultasch, Pamela Monzert, Victor Posner, Steven Posner and Pennsylvania Engineering Corporation Secu
One of the less celebrated of the convergent tendencies of modern capitalism and communism, free enterprise and comprehensive socialism, is the way both are put at risk by their best rewarded and most ardent partisans. This is now superbly evident in the Soviet Union in the current resistance to the Gorbachev—or any serious—reforms by the comfortable and often privileged bureaucracy. It is from there that comes the strongest affirmation of so-called socialist principles and the need for stolid adherence thereto at whatever cost. Inherent in this huge bureaucracy is the economic stultification that manifests itself in low economic growth and irrelevant response to consumer wants and needs.
The same adverse contribution by the greatest beneficiaries of the system has long been noticed in the nonsocialist world and especially, perhaps, here in the United States. It was the affluent and privileged, and notably the great business interests, that most aggressively opposed the welfare state—opposed Social Security, help to the deprived, low-cost housing, health care. Also trade union organization and support to agricultural prices and income. Also, in the post-Keynesian age, the assumption of macroeconomic responsibility by the state, however imperfectly discharged, for the overall performance of the economy—for countering economic depression, unemployment, and inflation, and seeking a satisfactory rate of economic growth.
Forty years or so ago the name of John Maynard Keynes aroused at least as much antipathy in the business community as that of Karl Marx, more perhaps because his ideas were a more clearly present danger. It was by these ideas, and more especially by those leading to the welfare state, that the powerful forces of anger, despair, and alienation implanted by capitalism were subdued. And those who would otherwise be suffering were brought in our own time, at least in part, to the support of the Republicans and George Bush. If the attitudes of those with the most to lose had prevailed, there can be little doubt that the system by which they were supported and rewarded would have fallen into yet more grave disrepute and perhaps would have been lost.
The determination of its greatest beneficiaries to put the capitalist system at risk has continued and, if anything, increased in the 1980s. It is now manifested in the field of corporate finance; its method is to exploit for private gain two features of the modern corporation that make it especially vulnerable to damage.
The first of these flaws, already noted and warned against in the company structures of his time by Adam Smith, is the anomaly of profit maximization. According to all capitalist principles, profit is for the property owners; it is for the latter, the shareholders, that the effort is made. Yet in the modern great corporation it has long been accepted in fact—though not, alas, in economic theory—that the ordinary shareholder, either individually or collectively, is normally without power. His, her, or their revenue is maximized by a management that is sovereign in its own authority. Profit is …