They provide the means to finance hostile takeovers, which keep big-time corporate managers on their toes.
The reason, he said, was that most big American companies were already public, so they tended to sell smaller blocks of stock to finance takeovers.
Almost half of the $150 billion of junk bonds issued in the last decade were used to finance takeovers or other changes.
He worries about the $150 billion in junk bonds that have helped finance so many recent mergers and takeovers.
Investment banks commonly provide so-called bridge loans out of their own capital to finance takeovers.
Chief among these has been its ability to trade and issue junk bonds, which have been used to raise capital to finance corporate takeovers.
Should the London market continue to decline, institutions would be unlikely to underwrite new stock issues to finance takeovers.
Some banks have a policy against financing hostile takeovers of big customers.
Some members of Congress are worried about the extent to which these bonds have been used to finance takeovers.
Now, however, it would be folly to finance most corporate takeovers with junk bonds.