Enron’s enduring legacy played out in film
On a Saturday night late last month I sat in one of the Carousel Grande’s tiny screening rooms ‘— practically a broom closet ‘— with about 15 other white people, all well over 45 and most of them fairly financially comfortable by their looks, to watch the documentary Enron: The Smartest Guys In the Room. So I guess that means I fit squarely in the demographic of The New York Times arts section readership.
This is an important film and I hope people will seek it out even if Greensboro movie theaters have packed up the reels and shipped them back to the distributor by the time this column is read. The film says a lot about us as Americans in another giddy, money-drunk age not so long ago. It says a lot about our capacity for self-deception as we reassure ourselves of our basic goodness while sliding into ever-more amoral territory.
Do you remember Enron, the Houston energy company that rose into the Fortune 500’s Top 10 before imploding in financial disaster in 2001? Remember the meteoric rise of their stock prices as they figured out how to trade energy shares on the newly-deregulated market, how a wave of blackouts rolled across California after deregulation allowed Enron to buy up the juice from its power plants? There was some talk about ‘“mark to market buying’” ‘— which apparently meant buying energy before it was even created ‘— talk about buying and selling unused broad-bandwidth, even speculative buying and selling based on the weather.
It turned out to be a sham enterprise in which nothing of value was ever produced. There wasn’t much real revenue coming through the door, so CFO Andrew Fastow created a host of subsidiaries to offload the debt so Enron’s accounting books would present a rosy picture. But Wall Street kept buying the hype and the stock kept climbing. Everyone was on the take: elected officials, accountants and lawyers. The giddy business press couldn’t get enough of the story, and no one thought to ask whether it was real until an enterprising reporter named Bethany McLean wrote an article for Fortune magazine in March 2001 called ‘“Is Enron Overpriced?’”
Unfortunately, the collective delusion didn’t benefit everybody. Executives in Enron’s inner circle quietly cashed out millions of dollars of stock options when it became apparent the gig was about to be up while employees of an Oregon utility company that had been recently acquired by the energy giant watched their pensions ‘— invested in Enron stock, as it happened ‘— evaporate because they, unlike the executives, weren’t allowed to withdraw them.
When the deal was up, most of Enron’s workforce was turned out on the street and overnight the company’s trophy skyscraper in downtown Houston was left vacant.
Who can remember it? Certainly not the president of the United States, who as governor of Texas, is shown in a video greeting card expressing well wishes to one of the company’s departing executives. Or his father, the 41st president of the United States, who calls the executive ‘“a great friend to our family.’”
But maybe we shouldn’t just write Enron off as a quaint piece of the past. Consider that Bush has been reelected after plunging the country into a dangerous war in Iraq and promoting a radical domestic agenda to scrap the social contract of the New Deal. Meanwhile the California governor who helplessly watched the blackouts hobble his state, a man named Gray Davis, has been replaced by an actor nicknamed ‘Terminator.’
What happened to us then, and what is happening to us now?
In the late 1990s, while Enron’s star was rising, I was organizing poetry tours across the sweltering South and dogging the Klan with an outfit called Anti-Racist Action in verbal confrontations that mixed mockery with indignation. Neither endeavors were putting me on the fast track to a successful career, as my marginal gigs in construction, restaurants and seasonal mall retail attested. I muddled through my self-inflicted poverty with bitterness and alienation, which is ironic considering that at the time the economy was in a period of unprecedented expansion.
Some of my more enterprising peers jumped into the brave new world of the information economy. In the new internet age, all of a sudden you could exchange caches of information, analyses and currency in real time, 24 hours a day, and it seemed as though the possibilities for getting rich might actually be endless.
I can hear those college classmates in the voices of Enron traders whose phone conversations were captured on tape and included in The Smartest Guys In the Room.
‘“The magic word is burn, baby, burn,’” one says. ‘“The core line, it’s on fire’… Buy more. Buy more. Burn, baby burn, that’s a beautiful saying.’”
In another conversation, two traders giddily discuss how one of their fellow employees took advantage of an artificial scarcity in California’s energy supply to drive up the price.
‘“He just f*cks California,’” one of them says. ‘“He steals from California to the tune of a million bucks or two a day.’”
‘“Can you re-phrase that?’” the other trader says.
‘“Okay, he arbitrages California to the tune of one or two million bucks a day.’”
So easy with the substitution of one word to make the plunder seem acceptable. And so hard the fall.
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