{"id":2074,"date":"2009-02-22T15:52:21","date_gmt":"2009-02-22T14:52:21","guid":{"rendered":"http:\/\/www.pauljorion.com\/blog\/?p=2074"},"modified":"2009-02-22T17:53:00","modified_gmt":"2009-02-22T16:53:00","slug":"laffaire-enron","status":"publish","type":"post","link":"https:\/\/www.pauljorion.com\/blog\/2009\/02\/22\/laffaire-enron\/","title":{"rendered":"L’affaire Enron"},"content":{"rendered":"

Certains d\u2019entre vous font des comparaisons entre la situation actuelle et le scandale Enron. J\u2019interviendrai peut\u2013\u00eatre au c\u0153ur-m\u00eame de la discussion mais puisque j\u2019ai consacr\u00e9 en 2003 un ouvrage \u00e0 la question Enron : Investing in a Post-Enron World<\/strong>, publi\u00e9 par Mc-Graw-Hill en 2003, je voudrais vous en pr\u00e9senter un passage. <\/p>\n

Vous me connaissez et vous devinez donc que le titre du livre n\u2019est pas celui qui avait ma pr\u00e9f\u00e9rence et fut impos\u00e9 par l\u2019\u00e9diteur : aux \u00c9tats\u2013Unis, tout livre de finance \u2013 \u00e0 moins d\u2019\u00eatre compos\u00e9 uniquement d\u2019\u00e9quations \u2013 s\u2019adresse n\u00e9cessairement aux investisseurs. En en relisant quelques pages au hasard je me rends compte que cela ne pr\u00e9sente pas que des inconv\u00e9nients : cela autorise en particulier une certaine v\u00e9h\u00e9mence dans le ton que je ne m\u2019autorise certainement pas quand j\u2019\u00e9cris en fran\u00e7ais.<\/p>\n

Voici les premi\u00e8res pages de ce livre. Je ne les ai pas traduites, pour faire vite et c\u2019est donc malheureusement en anglais mais j\u2019esp\u00e8re que l\u2019un d\u2019entre vous dispose d\u2019un merveilleux traducteur qui me permettra de remplacer rapidement ce texte en anglais par un autre en fran\u00e7ais. <\/p><\/blockquote>\n

\u201cOne reason that some look beyond Enron is that a fundamental question remains unanswered: Was the company the imperfect child of a healthy financial system, or the perfect product of an unhealthy one?\u201d Steve Liesman in the Wall Street Journal (1)<\/p>\n

When Enron got knocked off its feet through the cascading effects of its soaring debt, its innards were exposed to the light for everyone to see. Then it became clear that the Houston energy trading giant had been playing the bubble game and that when things turned sour, when debt had become overwhelming, there was only one strategy left to play: turn the machine into a stock price pump and hope that it would last. Enron had not invented speculative bubbles, neither was it the first company to turn itself into a stock price pump. It was unlucky to be among the vanquished. Maybe the name Enron will be remembered as that of the company that made us understand bubbles and made corporate America return from the casino back to the economy. <\/p>\n

1. The debacle<\/b><\/p>\n

The rapid collapse of the Enron Corporation over a mere 46 days took the American public by surprise and left the world of investment shell-shocked. As information was pouring in after December 2d, 2001, when the company sought for the protection of Chapter 11 of the Federal Bankruptcy Code, it looked like the torrent of disquieting news would never quell. Inquiry committees internal to the company were releasing their own conclusions, investigative journalism helped a wealth of additional facts to come to the surface, Senate subcommittees were summoning the main actors of the drama, and while many chose to remain silent, others were unraveling the events and the practices that had led to the demise of a corporation that only a few weeks before ranked number 7 among American companies. <\/p>\n

The public couldn\u2019t believe what it was seeing, torn between horror and disbelief. Enron\u2019s executives were properly aghast as all along they had shared in the delusion of Enron as the mother of all corporations. Even if it turned out, when analysts \u2013 better late than never \u2013 began dissecting the financial figures, that Enron had not been very effective at making money, it is not totally implausible that it could have survived for a considerable number of years, had it not failed on a technicality. What brought down Enron was that a partnership created essentially for accounting purposes, Chewco<\/i>, had been under-capitalized by sources external to Enron, failing to reach the critical 3% required by law. This was an oversight, indeed a minor one if it were not for its consequences, resulting from the deliberate complication of Enron partnerships, those Special Purpose Entities<\/i> whose main purpose when things started going really wrong was to conceal from shareholders that the Enron business elite was smart rather than undeniably intelligent. <\/p>\n

The main interrogation in the days that followed December 2d, 2001, was to what extent Enron represented an isolated case. Although the drama was out of necessity of a major scale because of the financial size of Enron, there was a secret hope that the Houston energy trading giant would turn out to be the only rotten apple in the basket of corporate America and could still be quarantined effectively. In no time however, similarities between other companies and Enron would be forthcoming. <\/i>Tyco International, Global Crossing, Qwest, Adelphia<\/i>, to name but a few, would be scrutinized and features they had in common with Enron dissected and exposed to the public by now properly mystified.<\/p>\n

I do remember from early childhood the sight of buildings damaged by World War II bombing where the front wall had dropped off like a too heavy stage curtain revealing what was left of the house sometimes relatively intact. The damage was often such that broken stairs prevented any looting on the upper floors and you could still see therefore, here and there, tables with tablecloths and chairs and paintings on the walls, or a bathtub in pristine condition but by now unreachable to bathers. The speed with which Enron collapsed had a somewhat similar effect, leaving for all to see a broken company in a fairly well preserved condition. Every individual investor who had lost money in the debacle was inevitably a befuddled onlooker while the public at large was shocked at the story of 20,000 employees having seen all or nearly all of their retirement savings reduced to rubble.<\/p>\n

Wherever the eyes would fall on the devastation the message seemed to be the same: greed materializing as dishonesty. The whole company seemed to have been built by its executives with the single purpose of cheating on the shareholders. Employees had not been targeted per se in the disaster and were essentially victims to the extent that they were prominent shareholders through their 401(k) plan where their contributions were matched (50 cents to the dollar) with Enron stock, while most wanted to see still more of it in their retirement savings. What was most revolting in the eye of many was that while employees were already down by the count, it all looked like executives had been given further license to gut the company from whatever was left standing. In truth there was nothing special to Enron there, just the consequence of two failsafe mechanisms. The first as a provision of Chapter 11 meant at \u201creorganizing\u201d the company instead of liquidating it, legitimizing retention bonuses (2) to key employees so that the firm were kept as much as can be in working condition. The second, not a requirement but present more often then not in American corporations, that in case of a company\u2019s bankruptcy, unlike those of employees, executive pensions are much better protected and sometimes even fully sheltered. Both measures appeared in Enron\u2019s case as rewarding for that matter the incompetent if not the confirmed scoundrel.<\/p>\n

2. Financial innovation at Enron<\/b><\/p>\n

The phrase \u201chouse of cards\u201d has been used ad nauseam since Enron\u2019s collapse but it takes only a second of reflection to realize that a proper \u201chouse of cards\u201d cannot allocate to anyone $30 million in commission fees, unless the company deals in unadulterated swindling. But this was not the case. Even if the corporation\u2019s culture was arrogant and aggressive, not suffering fools lightly, at one time it was doing great and the rising value of the stock price was reflecting a success story. Then Enron got embroiled in the tail-end of the dot com bubble and it started spiraling down to its demise. When branding Enron as the taint of the business world it is too easy to throw away the baby with the bathtub water. <\/p>\n

There is a great book published by a reputable publishing house, John Wiley, entitled, <\/i>Dangerous Dreamers. The Financial Innovators from Charles Merrill to Michael Milken<\/i> (3). The author is Robert Sobel, a well-known expert on the history of finance. Sobel, it seems, wished that would be part of the title of his book the name of a man who was once regarded as the scourge of the financial world and served some time in jail for his sins. Enron innovated in energy trading like no other company ever did. Enron has been at the vanguard of using clever derivative financial instruments in their full complexity to manage risk. This may come as a surprise to some but Enron had become a master player in the management of risk. It had had its fingers badly burnt in 1987 (4) in the early days of the company for failing to manage risk and it had promised itself that this would never happen again. My point when mentioning Sobel\u2019s book about financial innovators is that there might be one day a book about the history of financial innovation mentioning the name Enron, or maybe that of Jeffrey K. Skilling. There\u2019s a Latin phrase from history books, supposedly uttered by the Celt general Brennus during the sack of Rome. To lift the siege of the Capitol Brennus demanded a ransom; presuming that the Romans were cheating when weighing the gold, he threw his sword in the scale exclaiming \u201cVae victis!\u201d \u201cWoe to the defeated!\u201d <\/p>\n

———————————–<\/p>\n

(1) Wall Street Journal, 4\/1\/02, Steve Liesman, Investors Cast Aside Enron Concerns To Place Focus on Changing Economy<\/p>\n

(2) Salon.com, 2\/8\/02, Jake Tepper, Enron\u2019s Last-Minute Bonus Orgy<\/p>\n

(3) Robert Sobel, Dangerous Dreamers. The Financial Innovators from Charles Merrill to Michael Milken<\/i>, New York: John Wiley, 1993 <\/p>\n

(4) Houston Chronicle, 1\/17\/02, Enron Timeline<\/p>\n","protected":false},"excerpt":{"rendered":"

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Certains d\u2019entre vous font des comparaisons entre la situation actuelle et le scandale Enron. J\u2019interviendrai peut\u2013\u00eatre au c\u0153ur-m\u00eame de la discussion mais puisque j\u2019ai consacr\u00e9 en 2003 un ouvrage \u00e0 la question Enron : Investing in a Post-Enron World<\/strong>, publi\u00e9 par Mc-Graw-Hill en 2003, je voudrais vous en pr\u00e9senter un passage. <\/p>\n

Vous me connaissez […]<\/p>\n<\/blockquote>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_crdt_document":"","footnotes":""},"categories":[1,18],"tags":[],"class_list":["post-2074","post","type-post","status-publish","format-standard","hentry","category-economie","category-monde-financier"],"_links":{"self":[{"href":"https:\/\/www.pauljorion.com\/blog\/wp-json\/wp\/v2\/posts\/2074","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.pauljorion.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.pauljorion.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.pauljorion.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.pauljorion.com\/blog\/wp-json\/wp\/v2\/comments?post=2074"}],"version-history":[{"count":5,"href":"https:\/\/www.pauljorion.com\/blog\/wp-json\/wp\/v2\/posts\/2074\/revisions"}],"predecessor-version":[{"id":2085,"href":"https:\/\/www.pauljorion.com\/blog\/wp-json\/wp\/v2\/posts\/2074\/revisions\/2085"}],"wp:attachment":[{"href":"https:\/\/www.pauljorion.com\/blog\/wp-json\/wp\/v2\/media?parent=2074"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.pauljorion.com\/blog\/wp-json\/wp\/v2\/categories?post=2074"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.pauljorion.com\/blog\/wp-json\/wp\/v2\/tags?post=2074"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}