Banks Replacing Enron in Energy – Despite All The Righteous Indignation In The Wake Of Enron’s Failure Did We Really Learn Or Change Anything?

Enron Redux – Have We Learned Anything?
Greed; corporate arrogance; lobbying influence; excessive leverage; accounting tricks to hide debt; lack of transparency; off balance sheet obligations; mark to market accounting; short-term focus on profit to drive compensation; failure of corporate governance; as well as auditors, analysts, rating agencies and regulators who were either lax, ignorant or complicit. This laundry list of causes has often been used to describe what went wrong in the credit crunch crisis of 2008- 2010. Actually these terms were equally used to describe what went wrong with Enron more than twenty years ago. Both crises resulted in what at the time was the biggest bankruptcy in U.S. history — Enron in December 2001 and Lehman Brothers in September 2008.Naturally, this leads to the question that despite all the righteous indignation in the wake of Enron’s failure did we really learn or change anything? Taken together with recent revelations about Goldman Sachs gaming the aluminum storage market and fines on market manipulation levied against Barclays and JP Morgan for electricity trading, the answer appears to be a resounding “NO!”
Both Enron and U.S. financial institutions benefited greatly from deregulation of their respective industries. Enron started its corporate life as an owner of regulated natural gas pipelines. With the deregulation of first the natural markets and then the electricity industry, the company evolved into a massive energy trading firm. Deregulation essentially allowed the commodization of electricity and unintentionally created the conditions where corruption, greed and deception flourished. Similarly, in the U.S. financial industry, the seminal moment was the Gramm-Leach­Bliley Act which repealed the Glass-Steagall Act that prohibited mixing investment and commercial banking This allowed financial institutions to become financial supermarkets and also become Too Big Too Fail, requiring massive amounts of taxpayer dollars to be spent on rescuing them during the financial crisis. Another important piece of deregulation was the 2003 Federal Reserve determination that certain commodity activities are complementary to financial activities and thus permissible for bank holding companies owning trading assets like oil storage tanks or metals warehouses…..
http://www.zerohedge.com/news/2013-08-02/guest-post-enron-redux-%E2%80%93-have-we-learned-anything
Banks Replacing Enron in Energy Incite Congress as Abuses Abound
The U.S. government permitted Wall Street firms to expand in the energy industry a decade ago, when the collapse of Enron Corp. and its army of traders left a void in the market. The results aren’t pretty.
JPMorgan Chase & Co. (JPM) settled Federal Energy Regulatory Commission claims this week that employees engaged in 12 bidding schemes to wrest tens of millions of dollars from power-grid operators. A Barclays Plc (BARC) trader stands accused of bragging he “totally fukked” with a Southwest energy market. Deutsche Bank AG workers, faced with losses on a contract, allegedly altered electricity flows to make it profitable instead.
The FERC’s investigations are fueling a debate among lawmakers and the Federal Reserve over whether to reverse more than a decade of policy decisions that let Wall Street banks keep or build units handling commodities and energy. Senators examining the firms’ roles have said they may call bankers and watchdogs to a September hearing amid concern traders are abusing their ability to buy and sell physical products while betting on related financial instruments.
Banks have been seen as “sources of capital investment and market liquidity,” said Marc Spitzer, a partner at law firm Steptoe & Johnson LLP in Washington and a former FERC commissioner. “But the tradition and culture of large banks is different than the conservative and risk-averse culture of regulated utilities.”
Rolling Blackouts

JPMorgan, the largest U.S. lender, announced last week that it’s considering ways to exit the physical commodities business, which includes energy trading. The New York-based company, led by Chief Executive Officer Jamie Dimon, 57, will pay a $285 million fine and disgorge $125 million in gains to settle the FERC’s case without admitting or denying wrongdoing.
“We’re pleased to have this matter behind us,” Brian Marchiony, a spokesman for the firm, said as the accord was announced.
http://www.bloomberg.com/news/2013-08-02/banks-replacing-enron-in-energy-incite-congress-as-abuses-abound.html

Enron Style Accounting Fraud and Congress’ Sequester Squad

Here’s what’s in your Prime Interest today:
Let’s talk jobs. Are we sounding like a broken record? Yes, the unemployment rate ticked down this morning from seven point six to seven point four percent. The number of payrolls — or jobs — added was one hundred sixty two thousand, a bit short of expectations. And, as usual, the largest contributing factors were part time and low quality jobs. So, Bernanke and Co. have complete freedom to do whatever they want come September. And according to financial experts, the September FOMC meeting is the big one — because that’s when our beloved Chairman gets to take soft-ball questions from such journalistic luminaries as Jon Hilsenrath — and defend the undefendable. That would be more bond buying and QE madness.

Also, The role of so-called “auditors” is oft-overstated in our modern capitalist markets. According to Crazy Eddie CFO, Sam Antar, the entire concept of an audit provides a false sense of security. Four big firms control most of the market. That would be Deloitte, Earnst and Young, PriceWaterHouseCoopers, KPMG. But they do much more than checking the ledgers of the fortune 500 companies they represent. They also consult with them and help resolve regulatory disputes. A conflict of interest? We leave that to you, the viewer to decide. Bob talks to Francine McKenna, Forbes columnist and editor of the blog re-the-auditors.com, about the role of the big four auditors in perpetuating accounting fraud in the big banks and Fortune 500 companies.
Plus, since the implementation of the sequester, over 800,000 federal workers have been furloughed and numerous government agencies have been shuttered. With a budget battle looming in the fall and rhetoric on the hill heating up, there seems to be no end in sight for the mass budget cuts. Bob talks to Mark Levine, host of “The Inside Scoop.”
And are we witnessing LIBOR redux? LIBOR was the scandal that involved interest rate fixing. And Now the $300 trillion interest rate derivatives market is under scrutiny. The CFTC is investigating, but the lack of any substantive conclusion to silver market manipulation case does not set an encouraging precedent.
Speaking of swaps, is it LIBOR redux? Recorded telephone calls and e-mails show that traders at Wall Street banks instructed a firm to buy or sell as many interest-rate swaps as necessary to move the benchmark rate. By rigging the measure, the banks stood to profit on separate derivatives trades they had with their clients. We’re waiting with baited breath on the Fed’s response to this one.
Finally, a former Goldman Sachs trader was found liable for fraud. Note, this was not any of the top execs. No, the Department of Justice goes after mid-level employees so-as not to jeopardize the too-big-to-jail doctrine. We’re not even going to mention his name, because it simply does matter. They conveniently never include the top dogs. We talk about accounting fraud, sequester effects and the revolving door at the CFPB.
Royal Goldman Household & Goldman Sachs leeching money from American soul