Let's take a minute to recall that the following banks are involved in bailing out California:
"Six Wall Street firms, including Morgan Stanley, J.P. Morgan, Lehman Brothers, Salomon Smith Barney, Goldman, Sachs, and Banc of America, were among the successful bidders."
...for California's Revenue Anticipation Warrants.
An official familiar with the investigation will testify at today's hearings before that panel that Yosemite, Mahonia and other deals allowed Enron to understate its debt by 40% while overstating cash flow by as much as 50%, according to a draft of his statement. Cash flow is a crucial measure of financial health for energy companies such as Enron.
The comment about a repeat of the S&L crisis struck home to me. Particularly, the fact that the S&L crisis was triggered by a lot of shaddy transactions that could not be sustained when the tax laws were changed and market demand for property fell away.
The parallel I see is that the market was deregulated and all kinds of shaddy transactions happened but could not be sustained once price caps and refusals by State's like California (and its ISO) to play by the previously agreed upon "rules."
As in the S&L crisis, the change in tax laws was not the "critical event," but the underlying shadding transactions. I see in the power crisis, that the "critical event" will be remembered as the Enron, A. Anderson, various banks pushing up their revenues and volumes to falsely enhance stock price.
My question is that it has been a long time since I heard all the Democratic national party leadership chant Enron, Enron, Enron. They were the folks who wanted to investigate Enron for "gouging California electric power ratepayers" in the hope of discrediting the Bush Administration. They found that Enron did some shaddy things, but that in turn has snowballed into a real economic crisis. While the underlying economic crisis would have occurred anyway at some point in time, I think it will be interesting to see this November whether the Dem's loose more controll because of this or gain more control at the federal and state level. My hope is that they loose control, big time.
Until state bonds and RAW's are issued by California, the whole short term market could be a real crap shoot.