Even though seven years have passed, Enron is probably a company whose scandal you remember. The simplified version is something like this: you had an organization which:
- Had some performing assets and some very bad investments;
- Set up some "off-balance partnerships" into which they could move the bad investments;
- Propped up an untenable situation by leaving only the good stuff, thus creating the illusion of prosperity
So I ask you this: what is the difference between what Enron did and what the US Government is about to do with the "bad bank" proposal? Remember, people went to prison or put bullets through their own heads because of Enron.
Indeed, I would say what Enron did was actually better than what the Feds are proposing, because at least those who suffered due to the fraud did so at their own choosing. In other words, they elected to buy (and hold on to) Enron stock. ENE was falling a long, long time before the scandal broke and the stock truly collapsed. Anyone with even the most basic knowledge of a chart would have exited ENE safely.
The bad bank, however, forces the entire country to be saddled with toxic "assets." There isn't a way to sell.
I don't imagine anyone is going to wind up going to prison over this one. It's a million times worse than Enron ever was.
