Enron: The Smartest Guys In The Room
In the heyday of its hubris the trading floor of the gargantuan room full of the most macho men in Houston had two long staircases. One led to Lay and the other to Skilling. They were known as the two smartest guys in the room. These were two men, born poor, who were going to rule the world by being the smartest guys in the world. And for a while, they came pretty close. They ran the seventh largest company in the country, Enron
They certainly had California on a very short leash. During the days of wild expansion and wealth we had no energy. We had rolling blackouts and paid exorbitant prices for electricity. The power plants had plenty of capacity to make power, but they were being constantly told by Enron, who bought and sold their power, to shut down or ship energy to the desert. Enron was doing this to drive down supply, thereby allowing it to increase prices exponentially. With thirty billion dollars of high tech wealth going to Houston, the bubble did indeed start leaking.
And what happened to California? George W., Ken Lay, Schwarzenegger and Michael Milken, four staunch deregulators, had a secret meeting shortly before the Gray Davis recall and, the rest is history. Previously, natural gas and electricity were regulated heavily by state and federal governmental agencies. This changed largely as a result of political clout on the part of Enron by virtue not only of its size and deceptive appearance of profitability, but Ken Lay's relationship with the Bushes.
They were also able to use their power to get permission to use what they call mark-to-market accounting which allows them to, essentially, post self-proclaimed imaginary profits. This is what allowed Enron to post quarter after quarter of profits that never really existed. They were losing money on power plants in India and bad arbitrage bets while posting profit. The accounting got pretty creative, to say the least. And we all know what happened to Arthur Anderson, who traded scruples for fees.
Thousands of people who lost their jobs and pensions worked for a company whose motto was "Ask Why". Had those employees asked a few more questions they might have realized that the company they worked for had no real way to make money and was, in fact losing money as analysts raved, and people bought and Lay and Skilling and Fastow secretly sold. The one analyst who did question Enron was fired because of his questions.
The lawyers who approved all this and looked the other way were never asked too many questions, they just said, we'll make some tougher laws. And they did. Sarbane Oxley has been a very lucrative source or revenue for lawyers and accountants. Will that protect us?
The film, according to its director Alex Gibney, is not just about a few bad men. It's about the allure of money. It about how easy it is to bluff and buy everyone: the people who worked there, professional stock analysts, governments, the media.... everyone! We're all so impressed by people who exude confidence and money. It's all about appearance. We've become so lost and superficial.
We're a nation imbued constantly with information, seemingly so sophisticated and well informed. But we've lost our true source of knowledge, our inner guides that would have asked simple basic questions. It was only after Bethany McLean at Fortune started asking questions and pointed out that the emperor had no clothes, and Enron had posted years of phony profits, and manipulated the seventh largest economy in the world (California) from raging profitability to near bankruptcy that people finally clued in.
Meanwhile Lay, Skilling and Fastow made off with hundreds of millions of dollars that are now sitting in offshore accounts that will never be found. They were indeed smarter than the regulators who sought to control them and analysts who examined them. Being smart and unethical can get you pretty far, as I'm sure Milkin told Lay at the secret meeting. They may do a few years at tennis jail but, they'll live the rest of their lives in luxury. They won't even feel guilty. That's the dark side of the American dream, as Gibney called it, the belief that money is enough of a goal, enough of a measure of worth.
They certainly had California on a very short leash. During the days of wild expansion and wealth we had no energy. We had rolling blackouts and paid exorbitant prices for electricity. The power plants had plenty of capacity to make power, but they were being constantly told by Enron, who bought and sold their power, to shut down or ship energy to the desert. Enron was doing this to drive down supply, thereby allowing it to increase prices exponentially. With thirty billion dollars of high tech wealth going to Houston, the bubble did indeed start leaking.
And what happened to California? George W., Ken Lay, Schwarzenegger and Michael Milken, four staunch deregulators, had a secret meeting shortly before the Gray Davis recall and, the rest is history. Previously, natural gas and electricity were regulated heavily by state and federal governmental agencies. This changed largely as a result of political clout on the part of Enron by virtue not only of its size and deceptive appearance of profitability, but Ken Lay's relationship with the Bushes.
They were also able to use their power to get permission to use what they call mark-to-market accounting which allows them to, essentially, post self-proclaimed imaginary profits. This is what allowed Enron to post quarter after quarter of profits that never really existed. They were losing money on power plants in India and bad arbitrage bets while posting profit. The accounting got pretty creative, to say the least. And we all know what happened to Arthur Anderson, who traded scruples for fees.
Thousands of people who lost their jobs and pensions worked for a company whose motto was "Ask Why". Had those employees asked a few more questions they might have realized that the company they worked for had no real way to make money and was, in fact losing money as analysts raved, and people bought and Lay and Skilling and Fastow secretly sold. The one analyst who did question Enron was fired because of his questions.
The lawyers who approved all this and looked the other way were never asked too many questions, they just said, we'll make some tougher laws. And they did. Sarbane Oxley has been a very lucrative source or revenue for lawyers and accountants. Will that protect us?
The film, according to its director Alex Gibney, is not just about a few bad men. It's about the allure of money. It about how easy it is to bluff and buy everyone: the people who worked there, professional stock analysts, governments, the media.... everyone! We're all so impressed by people who exude confidence and money. It's all about appearance. We've become so lost and superficial.
We're a nation imbued constantly with information, seemingly so sophisticated and well informed. But we've lost our true source of knowledge, our inner guides that would have asked simple basic questions. It was only after Bethany McLean at Fortune started asking questions and pointed out that the emperor had no clothes, and Enron had posted years of phony profits, and manipulated the seventh largest economy in the world (California) from raging profitability to near bankruptcy that people finally clued in.
Meanwhile Lay, Skilling and Fastow made off with hundreds of millions of dollars that are now sitting in offshore accounts that will never be found. They were indeed smarter than the regulators who sought to control them and analysts who examined them. Being smart and unethical can get you pretty far, as I'm sure Milkin told Lay at the secret meeting. They may do a few years at tennis jail but, they'll live the rest of their lives in luxury. They won't even feel guilty. That's the dark side of the American dream, as Gibney called it, the belief that money is enough of a goal, enough of a measure of worth.
posted by Intervision at 2:34 PM
1 Comments:
All this Enron crap happened during Clinton. Big business saw what the fed was doing (cooking the books according to USAToday 8-01-2006)knew Reno was never going to prosecute. So now EVERYONE got popped by THIS administration and the left can only still blame Bush for knowing Ken Lay? NOT!
If Enron was Sooooo bad, why did the LEFT let Ken Lay do whatever he pleased ?
Oh and don't forget Al Gore, his zinc mine or his sitting on the board of his daddy's oil company WHO BOUGHT UP OUR STRATEGIC OIL RESERVES. The left lets Al skate ALOT.
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