Friday, May 26, 2006


Lay and Skilling Guilty

A big, boring scandal about Enron, an energy reseller that collapsed years ago, has come to a near end as the former chairman and CEO, Kenneth Lay and Jeffrey Skilling, respectively, were convicted of some sort of white collar crimes (fraud?) for overseeing and perhaps engineering the collapse. They will almost certainly be sentenced to decades in federal prison.

OK, so they go to jail. Is there any long term effect to the collapse other than more government paperwork? I think not despite former Enron adviser Paul Krugman infamous statement: "I predict that in the years ahead Enron, not Sept. 11, will come to be seen as the greater turning point in U.S. society."

Does he ever get tired of being wrong?

Your lack of compasion for the lives these guys ruined is telling.

I take most of what you say in stride, but this litttle gem is inexcusable...

some sort of white collar crimes (fraud?)

As if it is a victimless crime. Why don't you actually find out what they did before you insinuate that it was benign.

I'll give you credit though. Not many would actually stand up for these pathetic excuses for human beings. You are brave.
Gee Roger, I'm w/ Mike here. Again, instead of keeping your eye on the ball, you chose to step out of the box and take a swipe @ someone who frankly does not figure very highly in my pantheon of public commentators.

Is there any long term effect of the collapse? Other than hundreds of employees losing their jobs and their retirements? Why don't you comment on how our fearless leader has attempted to distance himself from the person he once called "Kenny Boy."

Thanks for the post yesterday, I think it was, on the Duke lax accuser. Meanwhile, I read that the Duke's women's team, which is ranked #1 in the nation and is headed toward the NCAA semis later today (Friday, 5.26) against last year's champion, Northwestern, will wear headbands w/ the word "Innocent" screen on them. The ladies have asked Miuke Pressler, the Duke men's coach who was forced to resign, to address them b/f the game.

I should not be surprised if President Brodhead nixed the headbands, but I expect the Duke ladies to be demonstrative.

Back in town. Hve a good weekend.
There is a substantial long-term effect of the collapse: A dramatic increase in useless bureaucracy in nearly every corporation in the country. (Note that this includes many corporations that are not based in the US, but that are traded on US exchanges.)

It is not at all clear to me that the effect of this sand in the gears will be less harmful in aggregate than the occasional Enron collapse. It's also not clear to me that there will be _any_ substantive positive effect from SarbOx. The goal seems to be better PR, not better corporate management.

Did it suck to be an Enron employee during the collapse? Of course. Frankly, the effect was relatively minimal for those with the sense to avoid putting most of their retirement funds into their company stock. Stupidity is often punished; it is not the responsibility of the government to legislate intelligence or common sense.

Is there anyone who actually believes that an attempt at such legislation would have a net positive effect? Go ahead; pull the other one.

Some folks defrauded lots of people. They were found to have violated the law then existing and have been sent to jail. But clearly we needed to make another law to add a concurrent sentence to future offenders. Serving eight concurrent sentences is clearly better than serving six.

Sure, there's a multi-billion dollar cost associated with this, but the benefit is ... what was that again?
Roger should stick to writing about stuff he is familiar with-- like the racial makeup of the NBA. Ever notice that for someone allegedly trained in the law Roger gets easily bored by litigation which casts a bad light on the Bush Administration. I think he is bored by Abramoff and Libby prosecutions as well. I guess he just doesnt appreciate the law.

But the Duke affair, thats exciting to Roger. I wonder why.
"Stupidity is often punished"

When does Roger get his?
You guys are waltzing around the real result of the government's slight of hand. Funny, they went for what was easy to prove. They put the "Capone" figures behind bars on boring white collar stuff. They left the "Mob" figure intact. The power cartel which, by itself, damned near bankrupted California is still fat and happy. That there was collusion has been demonstrated,(admitted, even) but our government does not pursue the still fat cats or defang them. Too bad.

I am not sure how to address your comment w/o seeming to be the elitist that I am. I agree that is is impossible, and therefore not the responsibility of government, to legislate intelligence or common sense.

I agree that common sense militates toward diversifying one's IRA.

Here is where the elitist part comes into it. I am arrogant enough, based upon my experience w/ my clietele which I believe to consist of people of average intelligence, based upon the entirety of my current experience, to think that most Enron employees lacked the sophistocation to understand their risk.

You, on the other hand, being a person of high intelligence and some worldliness would never have fallen into the trap they did. I am compelled to ask, however, why you believe, if believe you do, that these unfortunates would have acted as you would have? We can agree that there is no fundamanetal difference between we and they, but there would seem to be one of experience and perhaps training.

I think you decry the notion of governement stepping in to save people from their mistakes. But under some situations, wouldn't it be better for government to step in on the prevention end rather than the cure end?

I am certain we can agree that the wealth which was lost would have benefited everyone, w/ the possible exception of some of the lawyers, had it not been lost.

The effect of Enron's collapse was probably minimal for a few and devastating for many of the employees. I am sorry but I think it a mistake, so far as social policy is concerned, to hols the average citizen to your own abilities. Will attempting to rectify a set of circumstances that gave rise to Enron's effect on its employees engender the Nanny State? Maybe, but any more so than otherwise?

Have a good weekend.

Picking up on what IAM said about the power cartel and that that crime still goes unpunished, he is a story I read from a fellow blogger who was personally effected by the tampering which resulted in blackouts...

I was one of the Cali citizens that had to indure numerous blackouts in SoCal five years ago..(was it that long?).

It screwed up my job, my life. A friend died in a car accident due to the signals being out from the blackouts. I hate Lay personally..and very deeply.

You haven't lived until you have spent four or five hours in a windowless office without air conditioning...a couple of times a week.

How is that for a lasting effect?
Thanks all for the comments, except the guy recently out of Paxil, and you know who you are. I can be cavalier about white colar crime because I'm a lawyer who has done both criminal and civil. Civil is just about money and so is white collar crime. Sorry, I can't get excited about stealing or wasting money in the private section when our govermnent is doing it at a thousand times that rate. D. and I may not have many readers, but they are very smart ones indeed.
"I am compelled to ask, however, why you believe, if believe you do, that these unfortunates would have acted as you would have?"

I think it's pretty clear that they would not have, since they didn't. Further, I think it likely that others similarly situated would do the same in the future. I find this regrettable. I also find it regrettable when people make other ill-advised wagers that they cannot afford to lose.

Putting money into a single stock is a bet. The evidence indicates, I think, that the market as a whole is a long-term, positive-sum game. But the individual stocks, especially stocks that are moving fast, are much riskier. The people who lost their shirts in Enron stock chose a high-risk bet, in the expectation that they would receive a high gain. They placed their money poorly. This is in no way different from those who bet on losing horses last weekend.

"I think you decry the notion of governement stepping in to save people from their mistakes. But under some situations, wouldn't it be better for government to step in on the prevention end rather than the cure end?"

Two issues:

First, I'm entirely unconvinced that the government stepping in will result in people being saved from their mistakes. Central control has a track record that is both very poor and very long. As a result, I think that betting on the government is a high-risk bet. I'd rather not bet what I can't afford to lose.

Second, even assuming that earlier government interference would have resulted in fewer people losing their money, I think it likely that the externals would be, on balance, negative. In order to maintain a vital economy, people _must_ be able to bet big on high-risk ventures. Would any reasonable person have bet on Microsoft in 1975? Would any reasonable person now _not_ wish to have bet on Microsoft in 1975?

I don't want the government stepping in to tell people that they can't make those sorts of bets, _or_ to mitigate the risks. There must be a cost to choosing the next Webvan instead of the next Microsoft. The costs are the only way to enforce any sort of sanity in venture capital. No, I don't want prior restraint.

In the case of Enron, though, what we had was determined under the laws then extant to be fraud. There has always been, and there will always be, fraud. The perpetrators are being punished for that fraud.

There oughta be a law? There was; it worked.
Now, as to the power "crisis" in California:

California decided to deregulate power purchase prices, prevent long-term contracts, and continue to regulate retail sale prices. The result was entirely predictable: Rather than rationing by price during a shortage, they rationed by queueing*. And the queue became unpleasantly long. Tough; ignoring reality often has unpleasant consequences.

Had they allowed rationing by price, those who would have derived greater utility could have spent more, the producers would have made more money, and would have had a greater incentive to provide more supply in future shortages. It's called "free market economics"; it's clear to me that it would have worked better than what California tried.

* One of my favorite words; the only English word I know of that has five consecutive vowels. (I have little doubt I'll be informed of one with six or two more with five shortly, that being the nature of the internet.) 8-)
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