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Tuesday, June 2, 2009

Friday Frights (on Tuesday): Enron

Playing in the background: "The Science of the Movies" on the Sci channel

Hi all. Sorry for lack of blogitude lately. I've actually been (gasp) working. It's not very exciting - digging through hundreds of boxes of payroll records looking for certain records from a certain time frame involving certain locations in certain states - but it pays well, so hey, why not do it. Should go on for another couple of weeks. If things go exactly according to plan, we'll finish on my birthday. How cool is that: "Happy 40th, Jen, you're unemployed again!" Frickin' yay.

I did see a scary movie on Friday, but it wasn't my usual type. It was Enron: The Smartest Guys in the Room, a documentary about the rise and fall of the eighth largest corporation in the United States (at that time). If you lived in California during the "rolling blackouts" of the early Oh Ohs, you really ought to check out this film. I did, and even at the time I remember thinking, "Something's not right here. We can't possibly be out of power in the middle of December when we're hardly using any, and why are all these plants shutting down for 'maintenance' at the same time?"

Guess what, I was right all along. Whose fault was it? Enron's. Turns out their traders were purposely manipulating the electricity market to force up prices. Calling up power plants and asking them (ordering them) to shut down for a while because demand was low. Jamming transmission lines by sending power to nowhere so the power that needed to go somewhere had to wait, and then charging the utilities who needed the power to free up the line. How much did prices go up while this was going on? About forty thousand percent. Yeah, that's a 4 with four zeroes and some commas after it. To say nothing of the chaos and mayhem that went on all over the state as the "rolling blackouts" rolled along.

I got sent home from work one day when a rolling blackout shut my office building. (The air circulation failed, and so did the backup generator, which rendered the building uninhabitable. I'm not making this up.) My mom was visiting us for Christmas
and was buying a rather pricey vase in a souvenir shop in old town San Diego. The power went out, the shop's computer went down, and they couldn't run her credit card, so she left without it. People had to be rescued from elevators. Governor Grey Davis lost his job, which may or may not have been a good thing depending on your point of view, and Arnold "The Guvernator" Schwartzenegger took over. 500,000 people in the state needed some kind of electrical device, like an air filter or an oxygen system or some other life support, to stay alive. We don't know how many of them died or suffered serious harm. And this wasn't an apocalypse-scenario, "we've run out of resources and we're all gonna die" type crisis. This was an invented situation so some folks could make lots of money.

Oh, and it was also illegal.

The ironic thing is, Enron never actually made any money. Their stock prices went up and up and up because they were using something called "mark to market accounting" to claim profits from projects that hadn't actually come into existence yet. When they started to run some debt, they "sold" it to a shadow corporation to make it look like Enron didn't have any negatives on its balance sheet. It's like a bad sci-fi story, only it really happened. When the whole thing crashed and burned, which was inevitable, 20,000 people lost their jobs. Stockholders lost their life savings. Arthur Andersen, Enron's accounting firm, went down in flames. So did their law firm and quite a few other companies that had worked with them.

Guess where our current recession started, folks? Right there in Houston in 2002. Oh, it took a while to infect the rest of the U.S. economy, but think about it. Subprime mortgages? Mortgage securities sold to China for unreal money to finance projects that weren't going to happen? Bank failures as a direct result? Bailouts? Connect the dots. Today Enron. Tomorrow GM, Chrysler, Bear Stearns, Bank of America - oh, wait a minute, that's already happened.

Anyway, it's scary as hell. Jen ranks it a WOW, five stars on my five star scale. And frankly, I can't think of anything else to say about it. Next week I'll watch something a little less scary. Like, say, Drag Me To Hell.

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