Book Review: Den of Thieves

James B. Stewart tells the story of the rise and fall of junk bonds, arbitrage, and the 1980s merger and acquisition era. Managers and investors utilized high yield debt to gain an advantage over more conservative bids. Michael Milken promoted the widespread use of these securities by corporate raiders and then by other blue chip firms. Arbitrageurs built firms that bought and sold equities betting on the success and failure of various mergers and acquisitions. These firms took on high levels of debt to boost earnings. 

Arbitrageurs reduce market inefficiencies by buying and selling securities misvalued by the market as a whole. Economics describes these investors as a vitally important force that rebalances short-term inefficiencies. The book portrays this profession as virtually all based on insider trading. One such arbitrageur, Ivan Boesky, used insider information obtained from Michael Milken and others. 

Investment bankers provided valuable services for companies and generated massive fees by selling debt and equities for firms. Many firms opened their own arbitrage groups to expand revenue capabilities. One way to keep arbitrage units from utilizing illegal insider information was the concept of a "Chinese Wall". In practice, these units could not share information bankers like Martin Siegel blurred these lines internally by overseeing Drexel Burnham Lambert's arbitrage unit.

Stewart links the different key wall street players involved in the insider trading circle. The genius these bankers showed in legitimate business, carried over into the illegal to include tax evasion, parking securities, stock manipulation, and fraud. 

The book includes the work of the Department of Justice and Securities and Exchange Commission to prosecute and convict some of Wall Street's wealthiest and most powerful. Michael Milken eventually was indicted on 98 counts of racketeering and securities fraud. 

The accounts of Rudolph Guiliani's involvement proved one of the most interesting side stories. His political maneuvering and assertiveness seemed over-the-top even for him. Another anecdote that I found interesting was the subject Ivan Boesky's speech, "Greed is all right, by the way I think greed is healthy. You can be greedy and still feel good about yourself" at University of California, Berkeley.

The book itself draws from legal records, interviews, and other publication. Stewart does a great job of distinguishing the different bankers, investors, and lawyers involved.