The Enron Blame Game

The Cato Institute ^ | January 29, 2002 | Jerry Taylor and Peter VanDoren

[backhoe]

randita wisely notes:

If that's not political, I don't know what is. Davis and the CA Legislature, by their socialistic meddling in the free market, have created a huge financial debacle that will plague the state for decades to come. If he's re-elected, the meddling and the financial disaster will go on. I fully expect CA to require a federal bailout in the future to avoid bankruptcy...

The free market has a lot wrong with it, but it is infinitely preferrable over one-size-fits-all government and arrogant bureaucrats.

[Ernest_at_the_Beach]

Whoops, you slipped in while I was doing my cut and paste.

Sorry!

[Ernest_at_the_Beach]

Thank goodness Simon is pointing this out.

The Cali Media is not doing much to get his message out though!
But that is not a big surprise!

[Dog Gone]

I remember Jerry Taylor, one of the authors, from some earlier articles on California's situation. He nails it again in this one.

Thanks for finding this.

[EVO X]

Did you catch this from the article?

Yes I did.

[Carry_Okie]

You're right. How could such a minor player like Enron "bring California to it's knees", eh?

While it is true that California has only itself to blame for its inadequate generating capacity, this statement belies the ability of a bit player to manipulate price in a tight market, PARTICULARLY one that is restricted to the spot market. Now, WHY was the legislation written that way and who paid for it?

[snopercod]

WHY was the legislation written that way and who paid for it?

Beats me. AB1890 was one thing, but the implementing regulations are another. The feds are involved as well, with the "tariffs".

Who can figure it out? I can't, but Enron seems to have.

[snopercod]

Good analysis, but I have one minor nit to pick:

"CA made laws preventing energy producers from passing on increased costs to consumers."

It was the CPUC who did that, not the legislature. The utilities petitioned for an emergency rate increase [December, 2000, I think] when all this began to unfold, and Loretta Lynch shunned them.

(For the record, Loretta Lynch quit her job in 1992 and moved to Arkansas to work on clinton's election campaign. This should tell us all exactly where she stands.)

I would like to remind everyone that as I see it, this whole Enron media circus is just an attempt to divert attention from the impending bankruptcy of California. The state will be officially bankrupt later this month, or early next. Employee paychecks will start to bounce. Davis will need someone to blame that on, now won't they? Guess who?

Clinton went so far as to bomb an innocent aspirin factory and some goat pens to divert attention from "The Blue Dress".

Should we be surprised that Davis is trying the same technique in his own clumsy and impotent way?

[randita]

The state will be officially bankrupt later this month, or early next. Employee paychecks will start to bounce. Davis will need someone to blame that on, now won't they? Guess who?

And if Davis can get more (he's got a great start) traction on the state being a victim in a giant power play (pun intended), then he can go to Washington with his hands out. I can hear Davis now: "The power companies screwed CA just like the S & L's screwed depositors--shouldn't the government action be the same?" And standing behind him will be Boxer, Feinstein, Waxman and the whole CA Democrat contingent. And if Bush doesn't give them the handout, that will be further proof that Bush is in bed with the energy business against the state of CA and its poor, hapless citizens.

I've no doubt that Bush will extend the price caps come Sept. 30 to at least get that off the table. And that probably will be no big deal--unless--the Middle East situation heats up affecting the price of oil products and/or the climate in CA heats up, causing a shortage of energy there and prices to spike.

And the $100,000 question is: When will the sheeple in CA come to separate the truth from lies and spin?

[Carry_Okie]

Here is the point few of us seem to remember: Gerry Brown, John Bryson, Steve Peace, Gray Davis, and others have known each other for 25 years. They are all lawyers, and despite what Dog Gone says, they aren't dumb. They are power hungry, ambitious, manipulative ideologues who will go to any lengths to get what they want and believe that the media and their monopoly on State government will help them get away with it.

They hate suburban development in this state, and desire a balkanized society where the rich toast each other in wine parties at their eco-mansions at the expense of slave labor. That is what they want and that is what they are building. They hate the middle class because it “consumes” resources that they want for themselves.

To call the way deregulation turned out in California unplanned or foolish requires ignoring the way these people have either accepted massive financial support from or directly worked for elements of the energy business. It ignores their individual histories and long associations. It negates their involvement in lawsuits designed to create the necessary underlying shortage that is the real foundation of the financial crisis in electrical prices.

Needless to say, it is of course in the interest of this moneyed elite to profit as much as possible along the way. They restrict urban real estate and profit on the scarcity. They finance the loans to the State and click their tongues and waggle their fingers solemnly when it needs more money. They import immigrunts to keep the wages down and finance a bureaucracy to serve them and eat at middle class taxes. They support gay rights and destroy middle class families with drugs and rotten schools. In short, they go right on building their fascist banana democracy.

So, should it be confusing that the Slave Party is building the same kind of state in California that existed in the old South? Why should that be any surprise? In a global economy where exporting capital to play the same game is very profitable, why shouldn't industry come right along, especially when the RICOnuts give them few options to do otherwise?

[snopercod]

Were Gray Davis and John Bryson roomates at Stanford? I have been unable to confirm that speculation.

Very thought provoking post. Grampsand the WaspMan need to read this one...

[independentmind]

While it is true that California has only itself to blame for its inadequate generating capacity, this statement belies the ability of a bit player to manipulate price in a tight market, PARTICULARLY one that is restricted to the spot market. Now, WHY was the legislation written that way and who paid for it?

Which may have been the point that the recent article in the WSJ was trying to make. The article did not accuse Enron of illegal activities in California, but it did suggest that laws should be changed to make what Enron did illegal.

[Carry_Okie]

I found this:

1965

California energy-crunch news, continued: there was a superbly expressive photo in the San Francisco Chronicle of Gov. Gray Davis, ’64, and John Bryson, chair of Edison International. The governor announced the April agreement that the state would purchase transmission lines from Southern California Edison for $2.76 billion.

And this:

What Enron could learn from Gov. Davis, Edison

Copyright 2002 Union-Tribune Publishing Co.

By Thayer C. Scott

March 20, 2002

Many of the elements of the Enron debacle should look depressingly familiar to Californians as we consider the fortunes of one of our own giant energy companies.

Like Enron, this publicly traded corporation had close political, financial and personal ties to its host state government. Like Enron, this company badly bungled deregulation and miscalculated on the future of energy markets. And like Enron, this company turned to its friends in government as it teetered on the verge of bankruptcy.

But where Enron got the proverbial stiff-arm from the Bush administration in its moment of despair, this company got a helping hand from its state's governor and his aides. The company in question is Southern California Edison, and its benefactor is Gov. Gray Davis.

The Texas ties between Bush and Enron – from baseball outings to campaign contributions – have been reported and commented on ad nauseum. Enron, as a once-major energy company, certainly had its views considered when the Bush administration considered the broad outlines of energy policy. But when it came to their very survival, all Enron's connections got them was a door in the face.

Meanwhile, California's much more blatant version of politicians bedding down with corporations – and actually bailing them out – has been at best glossed over and largely forgotten.

Edison, like Pacific Gas & Electric and Sempra Energy, was crippled by a combination of skyrocketing wholesale energy prices and an inability to raise retail electricity rates. But even before the crisis hit in the summer of 2000, Edison's future was looking shaky. Its unregulated subsidiary was posting large losses after getting huge initial cash infusions from the sale of Edison's power plants. Furthermore, Edison was also losing large corporate customers like TRW and signing very few new ones.

PG&E's relationship with Davis would worsen as the crisis deepened, and it would ultimately declare bankruptcy and throw itself at the mercy of the courts. By contrast, Edison would enlist Davis in attacking out-of-state generators and federal regulators. When Edison faced financial oblivion in 2001, Davis would come to the rescue, a development that came as little surprise to those who had tracked the history of this governor and the century-old electricity giant.

Davis probably never called Edison International CEO John Bryson "Johnny Boy" (Bush had a similar nickname for Enron CEO Kenneth Lay) in their private moments. But the two Jerry Brown alumni and the key members of their respective regimes go back a long way.

Davis and Bryson attended Stanford together in the early 1960s. They both served Gov. Jerry Brown, Bryson as president of the Public Utilities Commission and Davis as Brown's chief of staff. Lynne Schenk, a former Brown Cabinet secretary, worked as an Edison consultant in the late 1980s and later became Davis' chief of staff. Both Davis and Bryson have close ties to (current anti-Enron crusader) Rep. Henry Waxman's Los Angeles political machine. Davis would take $235,000 from Edison during the 1998 gubernatorial election year, almost three times the amount he raised from the other utilities combined. (Davis' second highest contributor, incidentally, was Enron).

In March 2001, with Edison on the brink of collapse, the Davis administration would agree to a rate increase-and-rescue agreement for Edison that was almost universally derided as a bailout. By May 2001, Edison and the Davis administration would share both media consultants (former Gore aides Chris Lehane and Mark Fabiani) and lobbyists (former Sen. S. Bennett Johnston). Davis also had picked former Edison executives to negotiate long-term contracts with generators and rescue plans with utilities; manage those long-term contracts; and oversea the construction of new energy plants. Lehane would tell an LA Weekly columnist "the governor and Edison have the same energy policy." Much like CNN's "zipper" ad touting Paula Zahn's looks over her intellect, Lehane's comment was a priceless example of accidentally blurting out the obvious.

Desperately needing the semblance of solution, Davis would pursue legislative approval of the Edison package that summer with such a frenetic intensity that many Capitol veterans thought him unhinged. A Public Utilities Commission dominated by Davis appointees would ultimately agree to a settlement that allowed the utility to levy record price hikes on ratepayers to pay down a $3 billion debt. On Monday, Edison's stock price was $17.07 per share. Enron has been delisted.

Davis' Edison rescue may haunt him in this November's gubernatorial election, as several of the former Edison people he hired to shape energy policy are currently the targets of SEC investigations for insider trading. At this time, however, Davis appears oblivious to his vulnerability on Edison. His recently announced latest nominee to the PUC is none other than Michael Peevey, former president of Southern California Edison.

Meanwhile, congressional Democrats and various pundits are straining to tar anything remotely Republican with an Enron brush. If they are seeking a real, versus imagined, "quid pro quo," they should begin with the California governor's office.

Scott is a Republican consultant with MB Associates, a Sacramento-based research and communications firm.

[snopercod]

Yes, you hit the same wall that I did.

You would think that some enterprising reporter would ask the question.

[Dr. Frank fan]

When the right turns a blind eye to the corruption of the right, then the next election is lost.

Fair enough. But what "corruption of the right" are you referring to? Enron is a company that went bankrupt. Where is the "corruption" (other than by Enron execs)? And what does it have to do with "the right"?

What part of Enron campaign finance contributions and corruption do you not understand?

Here's what I do not understand. I do not understand why, if "the right" (Bush admin, I presume?) was so "corrupt" by accepting (LEGAL!) "campaign finance contributions" (I assume you mean campaign contributions), then how the heck did Enron go bankrupt?

From the way you tell it, one would think they had the Bush administration in their back pocket. So what went wrong? Let me know....

[Carry_Okie]

I would think that the transcripts showing common professors, classes, and organized group activities (frats, clubs, whatever) would be more revealing.

[Grampa Dave]

How about rich elite eco fascists of the slave party that hates the middle class?

I was living in Sacramento when MoonBeam announced his new "Era of Limits". Part of that era of limits was to curtail and eventually shut down any new electrical power plants and to delay our two nuke plants under construction.

Since 1976, these rich elite eco fascists worked hand in hand with the enviralists closing down power plants and limiting any new ones (damn few if any) to using only Natural Gas. (Enron and a few corporate backers of these super rich fascists), supported them and the economic terrorist enviralists to assure that atomic power was a no-no, hydro power was evil as it killed the fish gods, salmon, and of course anyother hydrocarbon fuel to produce electrical power was just too hideous to even consider.

Then, as Carry in a great work picture, noted that the Slave Party opened up our borders to ImmriGrunt labor. I can remember the two faced fascists of Club Sierra worrying and sueing anybody for spoiling the environment actually okaying the flow of illegal ImmriGrunts into the state. Thanks to Carry, we now know why.

So with no new power plants these Elite/Rich Fascists and their buddies engineered the blackout situations where our electrical supply could not meet the demand starting big time in 2000.

As gov_bean_ counter,(a very wise freeper with some great insight) pointed out that Enron really wanted Goron as their president.

The groundwork had been set up with Davis and his power fascists and the Economic Enviral Nazis. We would have seen full Fascism re power production, distribution and supply in Kaliland with Herr Davis and the Goron in power.

This is my opus for about a week. I will be doing Mother's Day things, honey do lists for next week, day trips and a vow to my bride to leave the computer alone during that time. I should detox most of my addiction to FR and following the Davis criminal actions.

You guys and gals are great. I learn so much about what is going on under our noses and around us for over 20 years for the first time by logging on to Free Republic. I want to thank all you for the great contributions and sometimes spirited discussions. I truly feel blessed to live in this time/age and able share with my fellow conservatives.

I know I left out some names, but hey, I'm a Grampa and I forget things.

See all you on the 20 or 21st, right here. Keep piling it on to our Fascist Davis.

This is thanks to Howie:

[Liz]

This is my opus for about a week. I will be doing Mother's Day things, honey do lists for next week, day trips and a vow to my bride to leave the computer alone during that time. I should detox most of my addiction to FR ......
You guys and gals are great. I learn so much about what is going on under our noses and around us for over 20 years ........by logging on to Free Republic.

A neat goodbye message, gramps. I know I speak for all the FR "gang" when I say we'll miss you. I hope Missus Gramps
isn't mad at us for monopolizing your time. We sure look forward to having you back digitally-energized and ready to post.

[Liz]

....the obvious question arises: If Enron were such an effective price-gouger and ruthless pirate,
how is it that the company went belly-up less than a year away from the scene of the crime?.......

Dumb question. Enron wore several hats all at the same time. Enron's collapse was the sum of its parts.
The day of reckoning came when Enron couldn't explain away its accounting gymnastics, like hiding its
colossal debt offshore - the cynical, maybe criminal, idea of CFO Fastow. Enron had many balls in the air.
It stepped out of its original role as an energy trader to start other trading ventures, ending in bad schemes.

[Howie]