Bob Weir ventured close to an anti—business rant yesterday ("Soul—selling an on Massive Scale"). Yes, Enron is certainly a scandal.  And I very strongly suspect that Lay and Skilling were involved.  But it was also part of the bubble.  Lay owned a lot of stock as the company augured in.  If he borrowed money to buy it, that may violate Regulation Q (margin limits on stock purchases), but it would also indicate that he was drinking the Kool—Aid himself.

I have no sympathy for frauds in business.  But why did people own Enron?  If they wanted to be conservative, they could have bought government bonds.  Why did they buy Enron?  To make more money than they could make in conservative investments.  Nothing wrong with that, but nobody broke into their homes and took the money.  They were looking to shoot the moon themselves.

Businesses fail.  They fail for a large number of reasons.  In Enron's case, it is very likely that the original business model was never any good, but that it provided interim profits that lit the fuse.  The auditors let them book the profits.  It was bad business but it may not have been fraud.   Three years ago, Rick Wagoner at GM told Barron's that GM would make $10.00 per share by mid—decade.  The stock moved up from 40 to the high 60's on that article.  Now it is at 18 and GM, far from making $10.00 in 2005, lost money and may go into Chapter 11.  Should Wagoner be in jail?

For perspective, Enron was very likely a fraud, but Social Security is definitely a fraud in the sense that it is taking in funds and promising benefits it is impossible for it to fulfill based on those funds.  Not even considering that the surplus in Social Security has not been saved, but has been spent.  Every politician — Republican and Democrat — who has said that Social Security is secure has lied for the last 30 years, and on a subject far more consequential than Ken Lay's assurance that Enron was solid.

Lay and Skilling are very likely guilty, but why not wait and see?

Greg Richards    1 08 06