Voice from the Past
A bit short on time due to the weather, but I already wrote tonight's post back on September 19th, 2008. Allow me to set things up.
By now you must have followed the Lehman collapse report which details all the juicy tid bits about cooked books and stress tests run on a sliding scale. For some color Zero Hedge is on top of this as is Naked Capitalism.
I do not need a detailed report to tell me what I already know, but it is great reading!
From my post in September 2008:
Enron Was Ahead of Its Time
You have to feel bad for those poor souls which ran Enron. They were years ahead of their time, they were just unappreciated as clever geniuses. If Ken Lay and crew had only waited a few more years, history would regard them as savvy players that used the whole "systemic risk" pocket aces to great effect.
Those poor Enron guys. While they were attacked for accounting fraud, Fannie Mae had their purchase caps lifted and was able to operate for 2 years without a single shred of quarterly reports. I mean, falsifying earnings reports is bad, but now that is the new good! Too late for Enron.
Enron used wild and complicated derivatives bets to lever up their small initial working capital into a mammoth, if hollow, money base. At the time this was panned as dangerous but today it is known as the investment bank business model. Again, too late for Enron.
Enron hid losses and wildly exaggerated their asset values using internal parameters that had no basis in the real world. Now this is currently known as "Level Three Asset Accounting" and "Mark to Model" pricing. Again, just missed by a sliver of geological time! Poor fools.
Enron shopped around for a buyer to help them survive, but after looking at their books there were no takers. Once again, we see that the Enron model was not wrong, just early. Today we have the FED and Treasury forcing mergers and buyouts for insolvent institutions, and when that fails they just bail them out themselves.
I think it is clear that the so called scandal that was Enron was something else entirely. I think Enron was punished and attacked so harshly because they exposed the clever plan the banks had for screwing the US taxpayer into paying for their never ending party. Enron was early once again, and paid the price. Their model was then copied and amplified to arrive at the point in time we are now at. I am not writing this to be funny. There is no material difference between Enron's behavior and that of today's players. Sick? Yes. Sad? That too. Basically what we deserve for being the losers that vote in fools? You bet your ass.
Any part of that not true or not clear?
Not to worry those of you with a bullish mind, reality has long since departed the collective soul of US markets.
Have a good night.