the CAMP ENRON Report

... gateway to the next Progressive Era?

Some say it's nothing but a train wreck ... roll in the big cranes, clear the track, see what the crew's been smoking. If I thought so, I'd not be writing this ... and if they thought so, they'd not be drumming so hard.

For a brief orientation, see this
Welcome to Camp Enron

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Camp Enron Archives
01/01/2002 - 02/01/2002 02/01/2002 - 03/01/2002 03/01/2002 - 04/01/2002 04/01/2002 - 05/01/2002 05/01/2002 - 06/01/2002 06/01/2002 - 07/01/2002 07/01/2002 - 08/01/2002 08/01/2002 - 09/01/2002 06/01/2003 - 07/01/2003

(2) All "major" articles of older material have now been imported, some with updates worth perusing. We'll keep it all on the main page for a while, will add a few loose pieces of history, will trim the main page and index the archives for convenience later.


free agent, loose cannon, pointy stick ... taking an imposing analytic toolkit out of the box, over the wall and into the street ... with callous disregard for accepted wisdom and standard English

reading the tea leaves from original angles, we've led with uncannily prescient takes on the federal surplus, the dotcom crash, the "Energy Crisis", the Afghan campaign, the federal deficit.

More where those came from ... stay tuned.

For brief orientation, see this
Welcome to CP

... gateway to the next Progressive Era?

For a brief orientation, see this
Welcome to Camp Enron

Many thanks to Tony Adragna and Will Vehrs, still shouting 'cross the Potomac at QuasiPundit. Early Camp Enron material can be found in QP's Dispatches department.
Saturday, February 23, 2002

--- A Tale of Endarkened Self-Interest ---

Camp Enron Players' little theater under the stars presents new episodes of the Tragedies of Enron, playing nightly. Our staging is unconventional ... from the wings off stage right, a chorus intones "All Clear! Nothing to see here, Citizens! Go on about your business! Beware the Liberal Medea! Beware the Venal Pols! Quick, don't do anything! No deeper meanings, no larger lessons here! Shit happens, get over it! Don't look behind that door! Why stay for the Second Act? Stop the show!"

Our right-wing chorus is too vast to permit individual credit to all concerned, but let's highlight a few voices.
Safire (NYT): "let us not get caught up in a frenzy ... The nature of the market ... is to correct itself ... this is happening now, all around us ... Posturing politicians do not make markets. ... People by their confidence make markets, and people learn painful lessons."

Jenkins (WSJ): "If humiliation, jail and disgorgement aren't enough to deter future Fastows, more New Deal regulations of the sort that failed to prevent Enron aren't going to help. ... Harrumphing in Washington won't stop the occasional Enron from falling off the edge. We'll be lucky, though, if the hullabaloo ... sillier and shriller by the day, doesn't ... result in something truly unwise."

Abelson (Barrons): "Committee members ... acquitted themselves extremely well of any suspicion of entertaining even a rudimentary acquaintance with business and finance. ... unintended consequences of reform are always noxious"

Bartley (WSJ): "despite all the arm-waving, it might be a good idea to let the law take its course before throwing the free-market baby out with the Enron bathwater ... corrections for much of this are already under way ... No board is ever again likely to be so cavalier"

Krauthammer (WP): "members of Congress falling over each other ... the market has already acted with a terrible swift sword. ... when irrationalities are finally exposed, markets swiftly self-correct. ... politicians, for all their huffing and puffing, will be just following the market"

Reynolds ( "compare the honesty of the federal government's accounting procedures with Enron's ... Congress as an institution doesn't have the necessary moral standing ... Enron's failure is a success ... liberal bias ... they've already managed to make Enron boring ... most people won't be paying much attention"
On CNN's Moneyline, the panel takes mere seconds to reach a unanimous verdict: Enron is forgotten by year-end.

To sum up:
(1) The story is overblown. Reporters and reformers are corrupt, partisan, grandstanding buffoons.
(2) Laws don't deter crime. "Reform" makes things worse.
(3) If anything is wrong, The Market will fix it ... or already has.

One problem with this assessment is that the original crime scene is still warm. New police tape goes up daily. Bodies, smoking guns, bags labeled "loot" turn up every few hours. Lean on any bookcase and a secret passage opens, and behind that a freshly mortared stone wall. Evidence lockers are bulging, the lead sheet overfloweth, prominent citizens scuttle furtively in the shadows. A bit early to close the book on Enron with a notation of "death by misadventure". If the right answer is "do nothing", there's still time ... isn't there?

For another thing -- and this is revealing -- most of the choral litany is false on its face.

Whoever loves markets well enough to get intimate with their history and theory knows this: markets do not self-correct for imperfect information. Just the opposite -- by the magic of the market, frauds multiply, diseconomic defenses spring up, output is reduced, resources are misallocated. Total cost -- often exceeding the extent of the crime -- falls disproportionately on the innocent. This has been known informally for millennia; analytic treatment has progressed markedly in recent decades, culminating in the 2001 Nobel in Economics.

How about the "school of hard knocks"? Absorbing one caper's painful lesson, do we avoid the next? Not if history is any guide. Sure the market reacts ... after a drug-related killing, for instance, dealers take their business around the corner until vigilance returns to normal. Like other gatekeepers, corporate boards have been cavalier before and will be again. See this abridged history.

How about deterrence? Lay whatever penalty you want on the "Risk" branch of the decision tree -- it won't deter many rogue CFO's so long as the "Reward" branch transforms millionaires into billionaires. Here, as in the case of the rogue trader who burns through a billion dollars of other people's money trying to pull even, post hoc justice has little traction. Cumbersome as it is, there is no substitute for prevention via proactive institutional oversight.

One thing is true of markets throughout history -- their members wise up, stand up, unite and demand regulation. It's part of that forgotten tradition of Enlightened Self-Interest. The Buttonwood Nation has reams of rules. Behind each rule lies a lesson learned in true-life tales from the dark side of rational self-interest.

Now, how about those grandstanding reformers? In the hearings I watched, Republicans -- notably Rep. Greenwood (PA) and Sen. Fitzgerald (IL) -- were marquee players, and Democrats took few cheap shots. By my mark -- throwing out high and low scores -- career politicians grasped the subject matter better than the parade of private-sector attorneys, accountants and financiers ... and these were come-as-you-are standing committees, not the inevitable select committees. The press stumbles now and then, but financial newshounds are winning their stars with incisive spadework and enviably clear presentation.

Yes, political axes are ground, and the unfortunate coincidence of ENE's proximity to GWB has opposing camps on hair trigger alert. Of course there's grandstanding, false positives and collateral damage. But our Vast Right-Wing Chorus is staking out its defensive perimeter on untenable ground, seemingly distant from core holdings. Why deny the undeniable and pretend the impretensible? Is it simply the fruit of naive analysis?

In my book, it's corrupt. Not intentionally corrupt, perhaps, but intellectually corrupt, culpable and liable ... just as a CEO is liable for fraud perpetrated under his willfully ignorant nose.

At stake is a perpetual rearguard action against TR's Progressive Era, FDR's New Deal, and the concomitant axis of evils -- taxation, regulation, litigation. By some lights the present danger is not overreaching regulation, not unwise regulation, but any demonstration of any benefit from any regulation. This faction gags on facts now because it has grown fat on lazy generalities at odds with the facts. They've dragged a self-satisfying distortion of market economics so far out on a limb of unreality, there's no place to go.

What ever you do next, don't look down! Admit the O-rings crumble when immersed in icewater, and a whole reliability engineering regime goes back to the drawing board. Concede one point of oversight that might have damped Enron's ballistic trajectory, and a whole cultural movement comes in for the equivalent of ... what? A bottom-up credit review? A crisis of confidence? A run on the bank? Insolvency? Scandal? Shareholder lawsuits?

As Homer (Simpson) exclaimed, "I see the light ... it burns!!!"

The Chorus of Endarkened Self-Interest is pitching a losing proposition, missing the point, and missing the opportunity of a lifetime. Houston, we have a major malfunction ... we're bringing the System in for Level Three diagnostics, and maybe a comprehensive overhaul. The resulting configuration need not be a mission-creep elaboration of the old order. False-choice trenchlines left from Cold War days will be graded over. We'll mark out new playing fields and make up new rules. There's abundant scope for conservative principles and market-oriented solutions in this creative problem-solving swapmeet. All y'all bring your best ideas to the table ... face facts, cut deals, try to build one with the fewest moving parts ... just make the damned thing work!

Or would you rather leave your seats on the Rules Committee to Michael Moore and Ralph Nader?

[authored 2002-02-23, originally posted on The Fray]