Enron vs. S&Ls

[Carl Remick]

Re LBO #99: "The Enron debacle is reminiscent of the savings and loan 
debacle of the 1980s,in that it was made possible by reckless experiments in 
deregulation — with a nice theoretical grounding provided by prestigious 
economists — compounded by private chicanery and incompetence.  Then, as 
now, regulators, politicians, executives, consultants, pundits, accountants, 
lawyers, rating agencies, and the press cheered on as the bubble was 
inflating, and seemed shocked when it burst.  The S&L mess should have 
inspired serious study of how we do economics and politics in the U.S.,but 
that never happened; we spent some $200 billion of public money on a bail- 
out with little debate and few consequences."

I would say Enron poses infinitely greater risk to the establishment than 
the S&L crisis ever did.  It was easy to calm the public's worries and 
socialize the reckless losses of the S&Ls thanks to federal insurance of 
deposits, and the merry maids of the Resolution Trust Corporation were able 
to sweep the wreckage of the thrifts' chicanery under the carpet with no 
fuss.  But there is no federal insurance that will make Enron's investors 
whole, and no way to provide meaningful relief to Enron employees et al. 
without setting a dangerous precedent for open-ended bailouts of all kinds.  
Since auditors obviously can't be trusted, there is widespread fear in the 
marketplace that there are many other Enron-type situtations waiting to be 
discovered.  This crisis does not lend itself to swift, tidy resolution.

Carl

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