JUSTINE UNDERHILL: : This week on How I Got My Start in Finance, Art Bilger joins Real Vision's Alex Rosenberg to talk about his career on Wall Street. Bilger discusses his exposure to finance during his teenage years, and his experience during a very volatile time at Drexel Burnham Lambert.
ART BILGER: Well, it's funny. I was just telling that story the other day. Someone was asking me. When I was 16 years old, I got my first job. And my father had gotten me a job as a summer intern for a small-- although very famous-- Wall Street brokerage firm, called Spingarn Heinen and Company. This was 1969, and I went to work there. This was boom days on Wall Street. And my job was to be a runner. Back then, they didn't have all the digital, and so you carried checks between firms, and securities between firms.
And the way I remember it, I was the youngest runner-- I think by 50 years. I think the next youngest guy about 66 years old. Anyway, it was a fabulous two months. It just opened my eyes to a world that I really didn't know anything about. And I came out of that summer saying, I want to go to work on Wall Street when I'm done with college. Subsequent to that, Wall Street crashed, and so my father actually tried talking me out of the idea of wanting to go to Wall Street. But--
ALEX ROSENBERG: What did he want you to do?
ART BILGER: Well, just-- you know, he was a business man. So it wasn't that he didn't want me in business, just Wall Street, he thought, was a problem. But anyway, I didn't listen. And so what happened was, when it was time to apply to college, I actually applied to the Wharton School at the University of Pennsylvania. And they admitted me. And that was-- that's how it all began.
And what happened is that I actually knew, over time-- and I don't remember how this was that I ultimately-- from a Wall Street standpoint, I wanted to become an investment banker. And you know, I really wasn't interested in the sales and trading side, but more the financial advisory type side, merger and acquisition. And I don't remember how that got into my head, but that was-- when I was attending the Wharton School, that was pretty clear to me.
ALEX ROSENBERG: And then, so we fast forward a little bit. I don't know how long. And we find ourselves at Drexel Burnham, you know, as that firm was becoming-- it must have been the fastest growth for any Wall Street firm, in terms of the amount of profits generated, and the amount of change to the financial industry.
ART BILGER: Well, let's go back a little bit, first, because there were some other critical points--
ALEX ROSENBERG: OK. Very good.
ART BILGER: --before Drexel. The one thing I didn't know until the summer between my sophomore and junior years at Penn, while I worked-- I had a summer job at the Chase Manhattan Bank, and I was working for an international VP there. And at the end of the summer, he took me out to lunch. He says, Art, you know, you're great, and the Wharton school's great, but I got bad news for you. You can't get a job as an investment banker in today's world without an MBA. And I said, oh. Now, it's obviously not like that today. Today we have analyst programs in all these firms. But there were no analyst programs back then.
And so what I did is, I said, OK, I'll go get an MBA. But I was going to finish Wharton. So actually, what I did is I actually shifted much of my curriculum to liberal arts curricula-- electives and liberal arts curriculum. Although the requirements for Wharton I did take, because I didn't really feel like duplicating my-- you know. And I literally went-- I graduated from the Wharton School in May of '75, and I started the MBA program at the University of Chicago in July of '75. I literally just drove from Philadelphia to Chicago.
Got my MBA at the University of Chicago, and now I was qualified to apply for an investment banking job, and applied to Drexel Burnham, as well as a few other places. And Fred Joseph, who at the time was running corporate finance-- and at this point, Drexel was unknown. Fred, who went to Harvard undergrad and Harvard grad-- everyone in the three years before me that he hired, I think, went to Harvard. So the fact that he hired me from the University of Chicago-- I even said to him, what happened? Everyone from Harvard turned you down?
Anyway, so I became-- I think there were three of us that joined that year. And so I joined Drexel in summer of '77.
ALEX ROSENBERG: And so--
ART BILGER: And originally in New York, in the corporate finance area, and then ultimately moved to California in the very early '80s.
ALEX ROSENBERG: Did you have a feeling, while you were at that firm, that we are changing the financial world around us? I mean, what was the-- what was it like, day to day, week to weak, being inside such and growing and influential company?
ART BILGER: Well, at first, it didn't seem like we had much influence at all. We didn't have any business. But I'd say in '78 is when-- I think in '78 we did our first junk bond financing. You know, new issue financing. We were doing a lot of-- I remember when I first joined, we were doing a lot of debt restructuring work. Because Mike Milken was already at the firm business, and trading a lot of the broken down securities out there. So actually, the first thing I ever worked on was the restructuring of the debt of an REIT. And what was interesting is I-- it owned all kinds of trailer parks in the southern part of the country. And I had to go down and do due diligence in Georgia and the panhandle of Florida. And I grew up in New York. I'd never seen a trailer park. I've since seen many.
Anyway, but it was '78 is when, I think, we did our first new issue bond deal. And that's really where the momentum began building. And then though '78 and '79, '80, '81, really started becoming a very significant product on Wall Street, in general. But Drexel dominated that business. There were other firms who did some, but Drexel truly dominated.
And it was also-- thinking about it, it was a financing vehicle for enterprises that really didn't have much in the way all of alternatives. So it wasn't just that we built a great business for ourselves, but we really enabled a lot of other entrepreneurs and others to build incredible businesses, that they might have had a tough time getting financing for.
ALEX ROSENBERG: Now, did your friends from Wharton and UChicago say, what the hell are you guys doing? You can't-- you know, you can't do this, this isn't how Wall Street works. Or--
ART BILGER: No. Because matter of fact, one of my closest friends from Chicago, he initially got out and went to work at another firm, and he was on the sales and trading side. And after a short period of time, I said to him, one of these days, you'll get smart, Leon, and decide to come to work at Drexel, and go to work for Mike Milken. And he actually eventually did. I think that was about four or five years later. But no, I think people were intrigued from pretty early on.
ALEX ROSENBERG: What was it like working with Mike Milken in the '80s?
ART BILGER: Well, it was fabulous. You had to-- a funny story, it's actually written up, I think, in some Drexel books-- I learned very early on that if you want to get ahead, and get ahead with Mike, you've got to play the game. And so there was this-- this truly happened-- at some point, I'm now living in LA. And I'm waiting for Mike. He was in a meeting for the end of the day, for a couple hours. And I forget what deal it was, but we had to make a decision on something. It was very time sensitive decision. And he comes out of the meeting about 6 o'clock, and I'm waiting. I said, Mike, listen, we got to sit down, we got to talk this through. We got to figure out what we're going to do on this. And he said, Art, look. I really apologize, but Laurie and the kids-- Laurie is his wife. Laurie and the kids are waiting for me. I can't be late. Can we meet first thing tomorrow morning?
So I said-- having played the game, I said, OK. No problem. I said, what time would you like to meet? And he said, could we meet at for 4:30 in the morning? And I said, what am I supposed to do between 1:00 AM and then? So working with Mike was a true experience. Learned, obviously, a tremendous amount. Also, Mike introduced all of us. He really became a magnet for a lot of pretty interesting people out there. So a lot of the interesting introductions, and ultimately relationships, that I developed over time-- a lot of them were original intros by Mike.
ALEX ROSENBERG: I think we all kind of know what eventually happened at that firm, but from someone inside, I mean, what was that like, the last years there at Drexel Burnham?
ART BILGER: One, it required a lot of change. So it was '86 when the first news broke. At the time, I was in LA and a fellow named John Kissick ran corporate finance in LA, and I was his number two. From the time I moved out, when it was John and me, we were now up to, I think, like, about 89 investment bankers in just Los Angeles. Forget about-- when I joined the firm in '77, I think I was the 21st or 23rd investment banker in the firm. We'd got up to about 600 investment bankers by then.
Anyway, what happened was when things-- we still kept doing a lot of business. You know? I don't know that it really hurt the business to any meaningful degree. What did hurt business a little bit is the stock market of '87. That did Influence a lot. But then we had to start thinking about what might happen. And I guess it was-- I think it was '89 when Drexel finally pled guilty. And it was as the-- and as a result of that, that's what really caused the unwinding of Drexel. One, Mike pled guilty, and had to go off to prison.
What happened when Drexel pled guilty, the banks started pulling our lines of credit. And so the economics of the day to day sales and trading were becoming impacted. So that was '89, and that's why I finally-- in February of '90, we went out of business. But we kept doing a lot of business. And I will tell you, the spirit of the people was quite good.
I mentioned Kissick because what happened is, when Mike had to leave the firm, John Kissick moved over to the high yield bond department. And he sat there from an administrative standpoint. I became head of investment banking in LA, and Fred Joseph, who now is the CEO of the firm-- he had me, Leon Black, and a fellow named John Sorte in New York become co-heads of the corporate finance area out there. And Leon was running the M&A group, I was running LA, and Sorte more of the general stuff in New York.
ALEX ROSENBERG: So before we move on, I'm just curious-- looking back now, do you think Milken has gotten a bad rap in the public imagination, and maybe Drexel Burnham has gotten a bad rap? Do you think that the perception of Milken as this criminal, running this big criminal enterprise-- I mean, I guess-- you know, you saw. You were there. You know everything that happened. And now, I think his perception is around these conferences, and that he's doing a lot of good things in the world. But I'm just curious what it's like to have been there, and now to see from the sidelines. People talk about-- Milken became one these figures of Wall Street greed, in the pantheon of these people like Madoff. You know? I guess, what do you-- what do you make of that?
ART BILGER: I guess I'm biased. But I think it was fairly unjust, what happened to Mike, in that-- yes, you know, I'm sure he did some things wrong. OK? I'm not-- I wasn't there into the detail, but I'm sure there's some things. But there were a lot of things done all over Wall Street that had never been criminalized. And criminalizing some of the stuff that the junk bond department of Mike may have done, as opposed to it being civil litigation-- I think that's one of the things that was unfair. Yes, it then took Wall Street, you know, beyond that. Yes it became aggressive with a lot of figures on Wall Street. But I do think Mike was-- and I think part of it was because he-- to be honest, because he and Drexel became so powerful. And we really controlled what now was a multibillion dollar market.
And I suspect-- there were always rumors that some of the pressure put on the SEC and the government may have come from competitors on Wall Street, who just were trying to compete for this incredibly lucrative business, but we're having a hard time. I wasn't part of the conversation, so I don't know for sure, but that clearly was the rumor.
ALEX ROSENBERG: And just one more thing. Does it make you look at-- you know, Wall Street regulation has been, really, one of the big news stories over the past 12 years. Does it make you look at the new wave of Dodd-Frank, and the way that regulators look at these firms-- does it make you look at all that definitely, having seen the regulation? Really, the start of the regulations get created ad hoc, as you say.
ART BILGER: Well, I do think regulation is important. And we're also living in, really, a totally different world, today, from global markets, and things like that. And so I guess one might argue that regulation is more important in a world that's, you know, spread literally from around the globe, and so many different players. And also, given the pace of what happens-- you know, so much of it is automatic now. As I started my story-- you know, when I was 16, I literally carried securities and checks. In today's world, it's absolutely instantaneous.
And a lot of it-- and this is something else I'm deeply involved in-- but a lot of it isn't even about human beings doing stuff. So much of it is about technology, and data, and analytics, and things like that. So I'm not opposed-- I'm not opposed to regulation. But let's make sure we keep the efficiency of the markets-- allow value to be created.
JUSTINE UNDERHILL: Bilger's education at Wharton and the University of Chicago, combined with his early experiences on Wall Street, prepared him to successfully navigate the treacherous waters of Drexel's closure. For Real Vision, I'm Justine Underhill.