Posted on 01/15/2002 4:03:05 AM PST by NativeNewYorker
New York, Jan. 15 (Bloomberg) -- Enron appeared to be a dream
come true for Democrats, a scandal that fell in their laps when
they needed to damage a popular Republican president.
They wanted to make it their Whitewater. The close ties
between President George W. Bush and Enron Corp.'s CEO Kenneth Lay
(Lay is the biggest individual contributor to Bush's presidential
and Texas gubernatorial campaigns); the apparent conflict of
interest, with Enron standing to benefit from government
regulatory decisions; the destruction of documents by auditor
Arthur Andersen; the calls from Enron executives to the Treasury
and Commerce Departments as the energy-trading powerhouse was
coming apart; the huge profits made by corporate insiders on the
sale of their Enron shares compared with the catastrophic losses
suffered by ordinary employees in their 401k accounts: Enron had
it all.
Too bad for the Democrats one of their own got in the way.
Squeaky Clean Bob Rubin, the former Clinton Administration
treasury secretary and Citigroup executive committee chairman,
tried to use his standing in Washington to help his company on
Wall Street.
Not in the same way Ken Lay did, mind you. Ken Lay did what
any CEO would do: He acted in the best interests of his
shareholders.
Questionable Ethics
Rubin did him one better. On Nov. 8, he called Treasury
undersecretary for domestic finance Peter Fisher, an old bailout
hand, having orchestrated Wall Street's rescue of Long-Term
Capital Management in 1998, and asked him what he thought of the
idea of calling the rating agencies to try and avert a downgrade.
At the time, Enron was rated ``Baa3,'' the lowest investment
grade rating, by Moody's Investors Service and was on review for a
possible downgrade.
Rubin's call ``was a soft-sell,'' said Michele Davis, a
Treasury spokesperson. ``He asked Fisher what he thought of the
idea of Fisher placing a call to rating agencies to encourage them
to work with Enron bankers to see if there was an alternative to
an immediate downgrade.''
A downgrade to junk status would have scotched the proposed
takeover of Enron by Dynegy, Inc. A junk rating would have made it
almost impossible for Enron to act as a counter-party on energy
trades, the most lucrative part of its business.
A Lot to Lose
Citigroup, which was advising Enron on the takeover by
Dynegy, stood to lose hefty fees if the deal fell through.
Moody's downgraded Enron on Nov. 28. The Dynegy merger
collapsed that day. Enron declared bankruptcy on Dec. 2.
It's one thing for Ken Lay to make calls to the Treasury, to
the Commerce Department, to the Federal Reserve, hoping to invoke
the too-big-to-fail doctrine. It is incumbent on a CEO to act in
the interest of his shareholders.
It's quite another thing for Rubin to use his government
contacts to attempt to compromise a private rating agency, whose
function is to provide an independent evaluation of credit risk,
to avoid a decision that would hurt his bank. Investors large and
small make decisions based on a company's credit rating. If
ratings can be manipulated, what purpose do they serve?
While Citicorp has refused to quantify its loan exposure to
Enron, the bank was the largest arranger of syndicated loans to
the company and is believed to have the largest exposure to Enron
along with J.P. Morgan Chase. Citigroup will release fourth-
quarter earnings on Thursday.
Separation of Powers
Yesterday, on ABC's ``This Week,'' Sam Donaldson asked
Treasury Secretary Paul O'Neill about the Rubin phone call.
``I never would have made such a call,'' O'Neill said.
The secretary went on to explain that when he left Washington
after his stint at the Office of Management and Budget in the
1970s, ``I made a deliberate decision that I was not going to
trade on what I knew about the government and people that I knew
in the government.''
Each phone call by Enron to the Bush administration for the
purpose of providing information or asking, directly or
indirectly, for help, was met with a firm ``no.'' There is no
impropriety there unless the facts change.
Meanwhile, the Enron story has provided enough juicy material
for a half-dozen Congressional hearings. The Democrats would love
to use them to chip away at Bush's strong popularity ratings and
deflect attention from his acknowledged success as a war
president.
They have one of their own, Bob Rubin, to thank for ruining
their fun.
While Citicorp has refused to quantify its loan exposure to Enron, the bank was the largest arranger of syndicated loans to the company and is believed to have the largest exposure to Enron along with J.P. Morgan Chase.
According to Enron court filings, Citigroup -- previously the bankrupt company's largest creditor -- is holding $3 billion in Enron debt.
CNN- Enron employees could have sold their ENE stock at almost any time in 2001:
The Bush DOJ a has decision to make. It appears they are going to let this go with "account reporting guidelines" as the problem, and if they do they better get ready for the heat, that dog won't hunt.
Do you read her bond market/economy columns regularly?
Rubin's call speaks of something different-an attempt to use government contacts to change a ratings notice by a respected company. But then...you expect nothing less from clinton holdovers....none of them have ever met with an ounce of integrity (or they would never have associated themselves with the clintons in the first place).
She's in my 'must-read' category. She's got gobs of street sense -- and she's a great financial analyst, to boot.
That's the long and short of it, my friend. From Citigroup, Lieberman has received $112,546 in campaign largess.
Exactly right.
Little wonder Dems why are succumbing to cold feet.
I think you really meant to say fish wrap, right? hehe.
Until it comes out that Davis & Co. conspired to bring down Enron. Not a difficult thing to do to a leveraged company, if you have the will and the way.
Wasn't it the head of the California PUC who said he'd like to see Ken Lay die in the penitentiary?
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.