Enron.Can someone summarize?

[spaceman]

I see it plastered all over the news,what is the big deal?


<---------doesnt watch tv(well,the occasional sports program,or classic tv show)


<----also doesnt feel like wading thru msnbc or cnn to figure it out

 

[gopunk]

> Capitalism
>
> You have two cows. You sell one and buy a bull. Your herd multiplies, and
> the economy grows. You sell them and retire on the income.
>
> Enron Capitalism
>
> You have two cows. You sell three of them to your publicly listed company,
> using letters of credit opened by your brother-in-law at the bank, then
> execute a debt/equity swap with an associated general offer so that you
> get all four cows back, with a tax exemption for five cows. The milk
> rights of the six cows are transferred via an intermediary to a Cayman
> Island company secretly owned by your CFO who sells the rights to all
> seven cows back to your listed company. The annual report says the
> company owns eight cows, with an option on six more. Now do you see why a
> company with $62 billion in assets is declaring bankruptcy?

 

[Rison]

Yeah, Enron created companies (worth about thousands of dollars) who turn around and say that they owe Enron millions (or hundreds of millions) of dollars. Now they have credit worth that much. Simple. I believe it was on the edge of the law.

 

[EagleKeeper]

Example.

You have an yearly income of $20K

Fill out a credit app and accidentaly put down $200K (simple error)

Credit card gets approved with a limit of $50K - They figure that with a $200K income you can afford it.

You realize the error and fill out 10 more credit apps with same info. All are approved with same limit.

You take cash advances against all cards, stash the money aside and then tell the banks that you made a mistake, you have no money and declare bancrupcy.

 

[spaceman]

ok so a money scam but on a much higher level
i think i got it,the quick and dirty was all i needed.
thanx!

 

[bozo1]

Yes, a money scam at the heart of it but there are more issues at play here:

Enron's accountants appear to have been in on it, or at least aware of what was going on.

Enron execs were still pushing their employees to buy stock when they knew it was about to tank. Many lost their life savings.

And the biggest possible scandal, even tho there has been no real evidence of it, is that Enron gave millions to lawmakers, both Republican and Democrats, and that may have influenced policy/regulations/laws in their favor.

 

[HomeBrewerDude]

<< ok so a money scam but on a much higher level >>



actually, on an international scale... that adds a diminsion of corruption that was present in the whitewater or the S&L crisis. Also makes this an foriegn affairs problem, rather than just a domestic issue.

 

[DanJ]

AND it affects EVERYONE. The government just doesn't print this money up.