Market Overview

Enron, Ten Years On

A full decade after the high-profile bankruptcy of Enron, and with the economy still in no small amount of turmoil, one has to wonder if the U.S. has learned any lessons at all.

Seemingly bursting out of nowhere, Enron quickly became the golden child of trading, throwing winning glances on oil, water and internet traffic, and rarely failing. It's stock tripled in two years but, of course, we now know that the whole thing was a sham. Ten years ago, we learned that it had barely made a dime.

According to the Associated Press, people didn't know how Enron made money because it was an amalgam of 3,000 private deals that came to light in its collapse, partnerships with companies like Raptor, Condor and Chewbacca.

“Behind those obscure names, Enron shunted billions of dollars of debt off its books. Investors were safe as long as they didn't ask too many questions. The company borrowed from Wall Street banks, mutual funds and insurers, pledging its hot stock as collateral. The collapse wiped out $11 billion in stock value, nearly 10 percent in the 401(k) retirement accounts of Enron employees.”

But as the Seattle Times points out, Enron's saga sounds frighteningly familiar.

“Using deregulation to create swindles, a lapdog board of directors and the co-conspiracy in the whole con by one of the world's most respected accounting firms, Arthur Andersen, and Citigroup's Sandy Weill. As the house of cards collapsed, the entire poker game fell down for similar frauds at WorldCom, HealthSouth and Tyco.”

Has the U.S. learned its lesson from Enron? Well, the phrase “too big to fail” is now a big part of the American vernacular. But was that the correct lesson to learn?

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