Quote of the Day: On Enron, and Who’s to Blame

Something has been missing from the coverage of the convictions of Enron bigwigs Ken Lay and Jeff Skilling.

Certainly they were the primary perpetrators. But others were either in on it or were incredibly, and perhaps willfully, ignorant.

A Toledo Blade editorial at least gets into the neighborhood (bold is mine):

Enron’s financial structure, with its byzantine network of bookkeeping contortions designed to hide losses, was a house-of-cards so intentionally complicated that almost no one questioned whether it was legal, especially since it appeared to be so profitable.

Moreover, it should be a resounding repudiation of what some on Wall Street in the late 1990s were calling the “new economy,” a business model in which the appearance of making money mattered more than reality. That was the ultimate Enron bluff.

Now that a jury has seen through their ruse and rendered a just verdict, Lay and Skilling will discover that while crime may be profitable in the short run, it usually doesn’t pay in the end.

The people who claimed to understand what Enron was doing clearly didn’t, yet pretended to. That would include the partners from Arthur Andersen, stock analysts, and many others. Most have paid some kind of price in the courts.

One who hasn’t, and who should be wearing a bag over his head, is New York Times columnist Paul Krugman, who, in a Fortune article in May 1999, essentially called Enron an exemplar for “the millennial economy.” Krugman’s receipt of $50 grand in return for that level of PR may well have played a part in delaying Enron’s reckoning well beyond when it should have occurred, in the process increasing shareholder, creditor, and retirement-plan participant losses. As Andrew Sullivan said at the time, “They got exactly the kind of puff-piece in a magazine like Fortune that helped perpetuate their scam. And Krugman was the author.”

Krugman should have asked himself what the correlation was, if any, between the payment and the services rendered, but it appears that he either didn’t ask, didn’t care, or has/had a highly-inflated view of his value. Thanks, Paul. (Here is his defense.)

It should also be noted that Krugman predicted (HT to Don Luskin for finding the quote) that the Enron story would turn out to be as big as 9/11 (statement referred to here by Instapundit). Don’t think so, Paul.