Bailout Watch #89 – Feb 06, 2002

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BAILOUT WATCH: Keeping an eye on the energy industry and the politicians

Bailout Watch #89 – Feb 06, 2002

Linda Lay’s liquidity crisis. Last week, the wife of embattled Enron chief Ken Lay cried on NBC’s Today show that, despite owning several homes, millions worth of other companies’ stocks and having recently cashed in hundreds of millions of dollars of Enron shares in recent years, her family is just about broke, or as Ms. Lay put it: "We are fighting for liquidity." She said that if only the public could hear the whole story and, Americans would learn that her husband is entirely innocent of the multi-billion dollar shenanigans for which he is accused: "[M]y husband is an honest, decent, moral human being who would do absolutely nothing wrong." (Hubby suddenly decided not to tell his story before the US Senate Monday but will have a second chance to clear his name now that he has been subpoenaed.) Forget energy market manipulation, according to Linda Lay the media is to blame, going so far as pinning the apparent suicide of a former Enron exec on the press: "It’s a perfect example of how the media can play such havoc and destruction in people’s lives and this is the ultimate."

More Laying the Blame.
Ken Lay feels betrayed by other executives at Enron, the Washington Post reported today. Apparently Lay, who knew about the financial trickery going on in his company, according to a 218 page internal investigation into the company’s collapse, was never told that hiding losses from the public might be illegal.

Speaking of illegal. Enron is facing contempt charges from the California Senate Committee investigating Enron’s role in the California energy crisis. Penalties for the company, which has refused to turn over documents, and its executives include fines, criminal investigation and arrest, according to the Orange County Register.

Still crazy after all these failures. Members of Congress claim to be applying their newfound "Enron lenses" to HR 3406, the energy industry’s latest deregulation proposal. Federal lawmakers promise to protect against loopholes that might allow for another Enron-style financial meltdown, but that misses the larger disaster looming over them: electricity deregulation. Even after Enron’s collapse and the California energy crisis that exposed deregulation as a fraud, some politicians are still pursuing this policy at the behest of their industry contributors. HR 3406 would repeal oversight of energy companies, and it would remove FERC supervision of energy company mergers, treating them as though they were merely financial transactions with no energy policy implications. Rep. Joe Barton (R) of Texas, the bill’s sponsor, by the way, is the third-largest recipient of Enron campaign contributions in the House, according to the Center for Responsive Politics.

Sen. Peace: Enron Made Me Do It. It appears that Vice President Cheney was essentially rubber-stamping the proposals of Enron executives and other energy industry characters in the crafting of the White House energy policy last spring. But what about the California legislators who let deregulation happen in the Golden State in 1996? "[Enron] had such control and influence over [federal regulators] that that in turn put California in a place where we had no choice" but to deregulate. This comes from California Senator Steve Peace, who was instrumental in crafting the deregulation legislation that first sent billions of consumer dollars to in-state utilities and then billions more to out-of-state power companies in the law’s short life span.

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