Once-Mighty Enron Strains Under Scrutiny

New York Times ^ | October 27, 2001 | ALEX BERENSON and RICHARD A. OPPEL Jr.

[liberallarry]

Enron's Growing Financial Crisis Raises Doubts About Merger Deal

It's getting "worser and worser". How bad is it going to be? LTCM and a government bailout? Chaos in the energy markets?
How could it get so bad? Where were the regulators and the credit-rating agencies?

[liberallarry]

New info on this thread. Your comments would be appreciated.

[liberallarry]

New info on this thread.

[Constitution Day]

Thanks for the bump.

I am not really qualified to comment, but will tell you that I am in a sector of the same industry as Enron.

[financeprof]

No bailout. No LTCM style deal. In this respect, Enron's close relationship with Bush and Cheney is a curse--it would be political suicide for the Administration to bailout Enron, so they'll stand aside. The credit agencies and others necessarily rely on the financial statements of the corporations they evaluate--if those statements are misleading or even fraudulent, the rating agencies will be misled too. I don't forsee much chaos in the energy market, tho there may be some. The main potential issue in the short run is that this will be another blow to the development of forward trading and long term management of electricity price risk. Enron's demise was due to (a) a "bank run" and (b) its poor investments outside its core business of energy trading. If there is a return on capital in that core business, capital will flow there. Enron's cloud is somebody else's silver lining. The main potential worry is a "daisy chain" of defaults--if Enron defaults, will it pull anybody else down with it? This was the main problem with LTCM. So far, I see no evidence of this occurring in the energy markets.