"Was Enron really a hedge fund disguised

Charles Jannuzi b_rieux at yahoo.com
Wed Dec 11 23:09:31 MST 2002


Wow, it took the NYT that long to come around to
that conclusion?

I think there were a few at FT and at the New
Statesman who came to that conclusion the day of
the bankruptcy, which is now over a year ago.

I remember when Enron was the darling of the
business press (which makes mainstream political
analysis seem cutting edge critical in
comparison); the almost always awful BW and the
positively evil Economist were in agreement:
Enron was the wave of the future (this was back
in the 90s when we were all supposed to be caught
up in the productivity miracle, the new economy,
the new new economy, and of course the .com and
telecoms bubbles). My reaction was, at the time,
I can't clearly make out just what it is that
Enron does besides make huge amounts of money, so
it seems fake.

The Economist made a big deal out of how Enron
planned to use its gas pipelines to string cable.
What SYNERGY! I remember writing a sarcastic
letter to the Economist asking, Why are they
running the cable this way? So all the workers at
the gas field can watch pay per view on their
pc's? No reply.

It seems to me that some meta-analysis of what
just happened from the late 80s til the bubbles
ruptured is in order, but it isn't really going
to come from the business press (they bog us down
with contradictory details and come up with a new
thesis everyday, soon forgotten). It sure isn't
going to come from nescient people like Doug
Henwood and his so called 'Left Business
Observer'.

But here goes my start:

The late 80s started these trends, some
overlapping:

1. Deregulation, privatization and
commercialization (such as the commercialization
of the internet) with key players and insiders
lining up to take advantage of it.

2. Move of huge amounts of money into private
equity (often offshore, out of the reach of the
already weak, ineffective SEC or IRS).

3. Move of huge amounts of money into
speculative, offshore hedge funds.

4. This relates most clearly back to #1 and #2:
the array of key players and insiders to
monopolize contracts to services provided the
'federal' government. This also relates to the
following point:

5. 'Consolidation' and 'rationalization' of the
US's huge military expenditures (which
unsurprisingly resulted in more money than ever
being spent).

Enron seems to have got into all of these except
perhaps the last one (though in the US's who's
who of companies, who doesn't have something that
goes back to the military and intelligence?).
Interestingly enough, so has GE. And so has the
Bush family's dearest financial concern, the
Carlyle Group. What distinguishes these?

Ultimately, I think Enron's downfall was their
structure and charter--they were a publicly
traded company.

So, then, are there some of the same things going
on at GE? Or is GE's steady business with the
federal and foreign governments their lifeline?
Is what separates GE from Enron the fact that GE
is really its own merchant bank, insurer and
credit group, too? And who checks the books at
Carlyle Group? For a private equity investment
fund promising 20-40% returns for elite
investors, they sure seem to have a lot of
uninvested money right now (hence the
geopolitical need to open up some new
opportunities--like nation building in Iraq,
which would be almost immediately profitable
compared to Afghanistan, where no one wants to
foot the bill).

Charles Jannuzi




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