Tuesday, Jan 22, 2008
Any of this sound familiar? Replace Electricity with Subprime....
Wikipedia: Enron: The Smartest Guys in the Room
and replace California with global...
Enron: The Smartest Guys in the Room is a 2005 documentary film based on the best-selling 2003 book of the same name by Fortune reporters Bethany McLean and Peter Elkind, a study of one of the largest business scandals in American history. The film examines the collapse of the Enron Corporation, which resulted in criminal trials for several of the company's top executives; it also shows the involvement of the Enron traders in the California electricity crisis. As an analysis of corruption in corporations the film gives a realistic look at corporate culture and the inherent problems within. The movie presents two mechanisms for motivating a vastly immoral and profit-driven corporate culture; namely the vitality curve and the Milgram experiment.
5 Comments
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1. lvmreader said...
Can any executive of any bank really say they didn't think the global subprime crisis would affect them and not be disingenuous?
You would have to be lying or clueless to not have seen this coming. There is a spectrum of credit quality which precludes anyone claiming they were unaware of problems building.
Yet many senior executives over the last 2 years have said that they did not have exposure to "subprime". This is at odds with the facts.
If you hold securities which are liable to be remarked as something other than AAA then you have some exposure to subprime.
2. Uh Oh Were In Trouble Something's Come Along And Its . . said...
I posted comments about this about more two months ago. As I explained then, I believe that the behaviour at Enron (greed, deception, fraud, etc) is infact so endemic right throughout the economy it should no longer be referred to as an 'economy' but as an 'enronomy' and thus the Republicans could be defeated at the Elections with the phrase "It's the Enronomy, stupid"
You saw the phrase here first.
3. drewster said...
@lvmreader:
Interesting analogy. Some banks and mortgage-lenders probably did act like Enron, lying and bending the rules to suit themselves. Others however will have been forced to go along with the flow - because if they didn't chase market share by loosening lending criteria, they would have failed to please their shareholders. It's an example of good CEOs being driven out by bad; a variation on Gresham's Law.
4. Camping said...
lee wanta.....
5. lvmreader said...
La plus ca change
1990s - Orange County and Kidder Peabody derivatives scandals
1998 - LTCM (the second most similar situation to this one - they didn't assess their actual risk to a default on Russian bonds)
2001 - Enron (the most similar situation)
2000 - 2002 Technology, Media and Telecoms (TMT) Bust
2004 - 2008 Subprime rise and fall - leading to massive contagion effects in other credit sectors