Wednesday, May 08, 2002

A few days ago, FERC released reports from Enron's own lawyers describing the involvement of Enron traders in creating and exacerbating the shortages which resulted in the artificial California energy crisis. It's been widely covered; see, for instance, this New York Times piece, including the truly priceless quote that one of Enron's gimmicks

appears not to present any problems, other than a public relations risk arising from the fact that [spurious Enron trading] may have contributed to California's declaration of a Stage 2 Emergency yesterday.

So much for the role of trading activity in promoting a stable supply.

Enron's own current management describes these Enron trading tactics as "very offensive". I've been waiting to see how Enron's apologists would react. The closest I've seen is this argument from Megan McArdle --- who, to her credit, has been critical of Enron's ancien regime in the past. She's responding to a correspondant, and straining a bit; at one point, her correspondant cites Charles Murray as a conservative critic of libertarianism, and she reacts as if he were claiming that Murray is a libertarian.

But back to Enron. Her basic reaction is that:

...the fact that California did a half-assed job of regulation is no more an indictment of free markets than Thomas Kincade is an indictment of painting.

A valid point, except that the critical flaws in California's regulations were basically put there by Enron (as I've discussed before at greater length). But Megan has an answer for that too:

I am relentlessly unsurprised that businesses seek advantage by lobbying; only that there is anyone out there silly enough to think that when the government has the power to decide whether a company will live or die, that company won't try to affect the process.

So the corporations are buying the laws they want. Isn't that how the free market is supposed to work? (That's what all the anarcho-libertarian fans of medieval Iceland --- one of the few known societies that actually put seats in the legislature up for sale --- seem to believe. That society developed feuds between ruling clans so violent that they had to submit to rule by the King of Norway to clean up the mess, but don't let that bother you).

Getting back to modern America, some of us actually do subscribe to the naive idea that whatever blandishments they're subjected to, legislators ought to at least consider the public interest. From which perspective neither major party has a great deal to be proud of. The Democrats have Fritz "the Mouse" Hollings and Robert Byrd to their discredit as towering princes of pork, and the Republicans have... well, for starters, Enron.

(And then there are the critics who, I'm sure, don't see the news as having any significance at all. After all, to return to my favorite whipping boy, someone claiming that there is no evidence of serious accounting fraud at Enron months after the release of a report commissioned by the board of directors describing serious fraud and millions of dollars worth of embezzlement is not going to change their mind on the basis of a report by Enron's outside counsel. He also says that the charges against Andersen aren't serious, even though Andersen itself described the prospect of indictment (let alone conviction) as a "corporate death sentence", and due in large measure to its legal troubles, Andersen is indeed dissolving into a puddle of bubbling green goo, in a manner vaguely reminiscent of the Wicked Witch of the West. Glenn Reynolds pronounced this argument interesting, which tells you more about Reynolds than it does about the case).

(Update: Dan Gillmor misses the same point as McArdle. via the aforementioned Glenn Reynolds).


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