Free Republic
Browse · Search
News/Activism
Topics · Post Article

Skip to comments.

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

Posted on 05/11/2002 4:12:10 AM PDT by snopercod

While it's still unclear exactly what caused the implosion at Enron Corp., one thing is perfectly clear: Ideological playwrights are jumping the gun to cast Enron in the starring role for their pet political morality plays. The most ludicrous role being cast for the corporation, however, is that of "jungle - capitalist - price - gouger - getting - its - comeuppance" - the role written for Enron by California Gov. Gray Davis & Company.

First of all, the obvious question arises: If Enron were such an effective price-gouger and ruthless economic pirate, how is it that the company went belly-up less than a year away from the scene of the crime? The awkwardness of the question almost certainly explains Davis's bizarre accusation that the company's own merciless behavior brought it down.

Since corporate ruthlessness usually reflects the vigor with which a company pursues profits, it would appear that Enron was actually not ruthless enough. For instance, records pried from the governor's office by legal action reveal that during last year's crisis Enron was charging less for electricity than the market average and significantly less than Davis's own L.A. Department of Water & Power, under the direction of the governor's "electricity czar," David Freeman.

Even were Enron overcharging, it was scarcely a major player in California's market. According to the governor's office, Enron only supplied about 4 percent of the state's electricity needs. Davis's relentless campaign to lay all or even some of California's electricity troubles at Enron's doorstep is ludicrous on its face.

Moreover, few remember that Enron was accepting IOUs from the power companies and the state of California rather than demanding cash upon delivery at the height of the crisis. But trusting the state to make good on its promises to pay was an example of the corporate heart ruling the head. According to energy economist Phil Verleger, the state of California ended up stiffing Enron for millions of dollars, a (dare we say "ruthless"?) maneuver that certainly didn't help Enron stay out of bankruptcy.

Second, the attempt to lay this debacle at the door of California's "anarchic capitalism, in which there are no rules and no referees" (in the words of California State Sen. Steve Pearce who - get this! - was the politician who wrote, sponsored, and helped pass this alleged anarchic capitalist system in the first place), is so ridiculous that it's hard to believe that it can be made with a straight face. We'd be happy to recount all the means by which regulatory oversight actually increased - not decreased - with the passage of California's alleged "deregulation," but space literally will not permit it.

Suffice it to say that, as industry consultant Charles Cicchetti put it upon the launch of the California experiment, "two things should be obvious. First, none of this should be called deregulation. Second, it is difficult to see how any of these myriad regulatory schemes, unless altered significantly but perhaps not fundamentally, will lower prices."

Thus, while it's still unclear whether California's regulatory environment had anything to do with the bankruptcy, that regulatory environment was anything but the "Wild West" alleged by Democratic spinners.

The related campaign to tie the president's energy plan to the machinations of Enron is also hard to swallow. While it's certain that CEO Ken Lay's voice counted for, say, more than ours during last year's deliberations, nowhere in the administration's energy plan was one of Enron's highest priorities - the mandatory imposition of what the company erroneously called "electricity deregulation" on every state of the Union. Enron's agenda, in fact, was regulatory, not deregulatory. They lobbied for dramatic restrictions on greenhouse gas emissions, heavy subsidies for renewable energy, and a host of interventions in the electricity market. Regardless, the constant attempt to argue motives (why the administration did this or that - were they bought? - are they corrupt?) rather than actual policy (is it a good idea to do this or that?), is one of the most disingenuous ploys in Washington, a ploy which is a smear by any other name.

None of this is to say that we are big fans of the Enron policy agenda or the president's energy plan. We aren't. But the intellectual gymnastics by which some are trying to tag the company as the font of all troubles and a poster boy of laissez faire is beyond irksome. The smoke has yet to clear from the economic wreckage. Let's wait and see what an investigation of those curious books finds before lessons are drawn.


TOPICS: Business/Economy; Crime/Corruption; Culture/Society; Editorial; Government; News/Current Events; US: California; US: Texas
KEYWORDS: calpowercrisis; enron; enronlist
Navigation: use the links below to view more comments.
first 1-2021-4041-50 next last
An article ahead of it's time...
1 posted on 05/11/2002 4:12:10 AM PDT by snopercod
[ Post Reply | Private Reply | View Replies]

To: snopercod
ahead of it's time bump
2 posted on 05/11/2002 5:53:46 AM PDT by lonestar
[ Post Reply | Private Reply | To 1 | View Replies]

To: snopercod
. The most ludicrous role being cast for the corporation, however, is that of "jungle - capitalist - price - gouger - getting - its - comeuppance" - the role written for Enron by California Gov. Gray Davis & Company.

I'm all for being patient and letting the facts tell the story about what happened at Enron. However, to dismiss the events occuring at Enron as isolated is naive. Also, the Wall Street Journal had a front page artice this week on some of the new revelations about Enron's activities in California. Last time I checked, the WSJ was not a bastion of liberal, anti-capitalists.

3 posted on 05/11/2002 5:55:45 AM PDT by independentmind
[ Post Reply | Private Reply | To 1 | View Replies]

To: Snopercod; calpowercrisis; ernest_at_the_beach
How refreshing to hear the truth for a change!

This article deftly refutes not only the ridiculous charges of the Davis flunkies, but also the assertions of quite a few newspapers who of late have refused to let facts get in the way of spin and lies.

Thanks. This is a keeper!

4 posted on 05/11/2002 5:56:10 AM PDT by randita
[ Post Reply | Private Reply | To 1 | View Replies]

To: snopercod
We aren't. But the intellectual gymnastics by which some are trying to tag the company as the font of all troubles and a poster boy of laissez faire is beyond irksome. The smoke has yet to clear from the economic wreckage. Let's wait and see what an investigation of those curious books finds before lessons are drawn.

Any analysis of the fall of Enron that fails to consider the circumstances surrounding its rise to prominence in the energy industry is shallow at best and intellectually fraudulent at worst. Enron's rise to the "big time" was facilitated by a series of favorable actions by the Clinton Administration (one published report said Clinton and Company acted affirmatively on 18 of 20 Enron requests for loans, grants and legislative initiatives) and the hope that the Kyoto Treaty would be enacted giving them a monopoly in a "new energy industry". The accounting gimmicks were only an attempt to buy time until Enron got "their man" in the White House. And make no mistake about it, Al Gore was that man. Forget the Enron donations to Bush. Every serious gambler bets both sides in a horse race. Enron needed Gore. What he would not be able to produce legislatively, he would accomplish by Executive Order. Remember, "Stroke of the pen, law of the land...Kinda cool". When the election did not go Enron's way, they knew they were in trouble. Thankfully, the Bush Administration rebuffed Ken Lay's overtures. After that, Enron's officials started bailing out. They knew it was over.

In short, Enron failed because the income side was based circumstances that were not sustainable and economic/environmental assumptions that were not viable.

Shame of many for not realizing this. This is not to excuse those on Wall Street, government types at SEC, ect. who did not do their homework and expose the sham that was Enron. There is much blame to go around. However, any attempt exposing problems should start at the beginning.

5 posted on 05/11/2002 6:00:10 AM PDT by gov_bean_ counter
[ Post Reply | Private Reply | To 1 | View Replies]

To: independentmind
However, to dismiss the events occuring at Enron as isolated is naive.

Considering the facts below, is it naive to conclude that Davis and Company are merely playing politics during this crucial election year-?

For instance, records pried from the governor's office by legal action reveal that during last year's crisis Enron was charging less for electricity than the market average and significantly less than Davis's own L.A. Department of Water & Power, under the direction of the governor's "electricity czar," David Freeman.

6 posted on 05/11/2002 6:00:11 AM PDT by randita
[ Post Reply | Private Reply | To 3 | View Replies]

To: randita
I haven't followed the California power crisis in enough detail to comment intelligently. What I would be cautious about is politicizing wrongdoing. Republicans are as equally capable of malfeasance as Democrats. And personally, except on a limited number of social issues, I don't see much difference between the two parties.
7 posted on 05/11/2002 6:06:58 AM PDT by independentmind
[ Post Reply | Private Reply | To 6 | View Replies]

To: independentmind
Since the 1940's, California has imported the lion's share of its required electricity. When the legislature forbid wholesale price increases because of a temporary shortage, they created a train wreck.
8 posted on 05/11/2002 7:03:01 AM PDT by Eric in the Ozarks
[ Post Reply | Private Reply | To 7 | View Replies]

To: independentmind
I haven't followed the California power crisis in enough detail to comment intelligently. What I would be cautious about is politicizing wrongdoing. Republicans are as equally capable of malfeasance as Democrats. And personally, except on a limited number of social issues, I don't see much difference between the two parties.

The problem is California doesn't have enough in state power capacity to meet peak summer time demand. They had to import power from surrounding states and Canada. Instead of letting market forces work, the state got involved and made some really bad long term energy purchases. Enron is a convenient political scapegoat.

9 posted on 05/11/2002 7:10:45 AM PDT by EVO X
[ Post Reply | Private Reply | To 7 | View Replies]

To: Black Birch
Correct. When Enron saw the opportunity to make a shitpot full of money because of a temporary opportunity, they did, just like the guy who runs your corner gas station or grocery store.
10 posted on 05/11/2002 7:30:10 AM PDT by Eric in the Ozarks
[ Post Reply | Private Reply | To 9 | View Replies]

Comment #11 Removed by Moderator

To: Eric in the Ozarks
Correct. When Enron saw the opportunity to make a shitpot full of money because of a temporary opportunity, they did, just like the guy who runs your corner gas station or grocery store.

I just don't buy the scenario that a couple of slimey characters at Enron brought California to its knees.

12 posted on 05/11/2002 8:43:23 AM PDT by EVO X
[ Post Reply | Private Reply | To 10 | View Replies]

To: independentmind;Elle Bee
Last time I checked, the WSJ was not a bastion of liberal, anti-capitalists.

There are a number of FReepers, including myself, who are very upset with the WSJ for printing that article, and another previous one. The concensus here is that arch-liberal Al Hunt was behind those two hit pieces. The first one in the WSJ read almost word for word with the one printed in the New York Times.

One FReeper has already cnacelled his WSJ subscription, and I am considering the same.

There are three Enron-related articles which actually defend capitalism and free markets, if you are interested:


13 posted on 05/11/2002 9:28:56 AM PDT by snopercod
[ Post Reply | Private Reply | To 3 | View Replies]

To: gov_bean_ counter
The biggest favor that clinton did for Enron was to rule that Enron was not a "utility holding company" under PUHCA.
14 posted on 05/11/2002 9:30:45 AM PDT by snopercod
[ Post Reply | Private Reply | To 5 | View Replies]

To: Black Birch
Did you catch this from the article?
According to the governor's office, Enron only supplied about 4 percent of the state's electricity needs.

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

15 posted on 05/11/2002 9:34:34 AM PDT by snopercod
[ Post Reply | Private Reply | To 12 | View Replies]

To: independentmind
What I would be cautious about is politicizing wrongdoing.

It's really difficult not to politicize this trainwreck. The whole phony energy dereg that the CA Legislature set up (originally under Gov. Wilson, then screwed up even more under Davis) caused the problem. When power supply got short and prices went up, CA made laws preventing energy producers from passing on increased costs to consumers.

CA further botched the situation by charging inexperienced, incompetent state workers to go out and buy power in a dog eat dog type market situation. They got fleeced, no surprise.

Davis and his foray into the power trading business were a disaster of monumental proportions. Now he seeks to blame others for his own ineptitude and get back any way possible (propoganda, lawsuits, etc.) some of the taxpayer's $$$ that he squandered in his panic-driven foray into the power trading business (which, by the way, he initially congratulated himself for--"I kept the lights on", he proudly claimed about the same deals he's now demonizing Enron and others for partaking in.

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.

Thank goodness Simon is pointing this out.

16 posted on 05/11/2002 9:38:38 AM PDT by randita
[ Post Reply | Private Reply | To 7 | View Replies]

To: *Enron_list
Check the Bump List folders for articles related to and descriptions of the above topic(s) or for other topics of interest.
17 posted on 05/11/2002 9:46:25 AM PDT by Free the USA
[ Post Reply | Private Reply | To 16 | View Replies]

To: snopercod
Great Post the best analysis of the Enron/Cali debacle yet.
18 posted on 05/11/2002 9:48:32 AM PDT by Free the USA
[ Post Reply | Private Reply | To 1 | View Replies]

To: randita;snopercod;SierraWasp; Carry_Okie; okie01; socal_parrot; snopercod; quimby; John Jorsett...
Thanks for the ping and the article!

Calpowercrisis:

To find all articles tagged or indexed using Calpowercrisis, click below:
  click here >>> Calpowercrisis <<< click here  
(To view all FR Bump Lists, click here)



19 posted on 05/11/2002 9:52:57 AM PDT by Ernest_at_the_Beach
[ Post Reply | Private Reply | To 4 | View Replies]

To: Enron_List;backhoe
You might be interested in this!

Enron_List:

To find all articles tagged or indexed using Enron_List, click below:
  click here >>> Enron_List <<< click here  
(To view all FR Bump Lists, click here)



20 posted on 05/11/2002 9:54:41 AM PDT by Ernest_at_the_Beach
[ Post Reply | Private Reply | To 19 | View Replies]


Navigation: use the links below to view more comments.
first 1-2021-4041-50 next last

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.

Free Republic
Browse · Search
News/Activism
Topics · Post Article

FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson