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Junk history

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What is it about the 1980s that makes the decade so irresistible to journalists covering Wall Street? Despite everything that the financial world has been through these past decades -- the rise and fall of leveraged buyouts, the tech boom and bust, the spectacular bursting of the housing bubble followed by a global meltdown -- the media can't seem to help itself from going back to the '80s for archetypes of finance. Whether it's a post-prison Gordon Gekko packing them in at the cineplex or the prevalence of the word "barbarian" in press accounts of Henry Kravis' $100 million donation to Columbia Business School, images from the ur-decade of go-go dealmaking still abound -- even if they don't exactly fit the situation at hand.

Case in point: a page one Business Day story in The New York Times that anoints Jim Casey, the head of J.P. Morgan Chase & Co.'s junk bond operation, a latter-day Michael Milken and his firm the second coming of Drexel Burnham Lambert. Despite the fact that Milken wound up in jail and Drexel spectacularly imploded -- facts the story acknowledges in a brief paragraph that begins with an apologetic "of course" -- the comparison is meant to be flattering. "The market for high-yield securities, as junk bonds are more politely known in the business, is booming as never before," the story breathlessly reports. "And Mr. Casey, one of today's junk-bond kings, is in the midst of a run unlike anything Mr. Milken saw from his X-shaped trading desk in Beverly Hills."

Casey, for his part, seems happy to help the Times paint him as something of the second coming of Milken: "Other than 1988 at Drexel, this is the best time I've ever seen, and it's getting better," he tells the paper, which gushes that Casey worked for the junk bond king himself. Further down in the story we learn that Casey joined Drexel post-college in the summer of 1987, placing him at the firm at the beginning of its end. But he wistfully recalls the glory days: "It was a great place; we had 70 to 80 percent market share."

The story eventually fesses up that Casey's current firm, J.P. Morgan, lacks such a near-monopolistic share; in fact, we're told Bank of America has edged it out of the top spot on the global high-yield league tables. We also learn the other ways that today's junk market differs from the one Drexel controlled, including the fact that most of the junk being issued is to refinance debt rather than to fund corporate takeovers.

But all that doesn't seem to really matter in this story, which can't hide its nostalgia for the "swagger" of Milken's day, and "the scrappy types who populated the junk-bond desks." It relishes the "trash talk" spewed by the "junkyard's" three main competitors and celebrates the aggressiveness of "the new kings of junk." The story is a startling reminder that for all the media's professed disdain for Wall Street, it's still intoxicated by Milken and his latter-day doppelgängers, even if they don't conduct their business from an X-shaped desk.

Meanwhile, on the same day the Times business section waxed wistfully about '80s Wall Street, a piece on its op-ed page called for a return to an even earlier time: pre-1970, when Wall Street consisted of private partnerships whose executives were personally liable for the risks they took. Written by "House of Cards" author William D. Cohan, the piece calls for the creation of a mechanism in which the top 100 executives at Wall Street's major firms be liable "not just [for] their unexercised stock options or restricted stock, but every asset they have in their possession: from their cars to their fancy homes to their bulging bank accounts." And he wants the firms to create this mechanism, in the form of a new security, themselves.

As appealing as it might be to imagine, say, Dick Fuld stripped of worldly goods, as Cohan implies would have happened if his scheme had existed when Lehman Brothers collapsed, it's less appealing to imagine all the businesses that might not have been financed over the past 40 years if Wall Street had not migrated from private partnerships of yore to limited partnerships and public corporations. Indeed, the new kings of junk that the Times business section is so enthralled with may very well be scrappy. But would they be willing to expose their own net worths to the vagaries of something called junk? Doubt it.

Yvette Kantrow is executive editor of The Deal magazine.