Trickier Times for Europe's Banks in 2002 --- Drop in Investor Confidence And Rise in Bankruptcies Set to Hurt Earnings
The Wall Street Journal, 12/28/01
Great Expectations: Did Greenspan Push High-Tech Optimism On Growth Too Far? --- Some He Won Over at Fed Have Second Thoughts; At Stake: Interest Rates --- Bank Took `a Bit of a Risk'
The Wall Street Journal, 12/28/01
Could've Been Worse
The New York Times, 12/28/01
JDS Set the Record, but It May Not Be 2001's Biggest Loser
The New York Times, 12/28/01
LETTERS TO THE EDITOR - Power traders necessary for efficiency.
Financial Times, 12/28/01
Commentary An Enron Tale of Strange Bedfellows
Los Angeles Times, 12/28/01
Despite the Shock, Davis Kept the Lights On
Los Angeles Times, 12/28/01
IN BRIEF / ENERGY Enron Bankers Delay Deadline for Financing
Los Angeles Times, 12/28/01
USA: Enron stock has rising value for collectors.
Reuters English News Service, 12/28/01
USA: Bush says 'deeply concerned' about Enron collapse.
Reuters English News Service, 12/28/01
Enron Seeks Bankruptcy Court Approval for Asset Sales by Year-End
Dow Jones Business News, 12/28/01
Enron Seeks Court OK For Asset Sales By Year-End
Dow Jones News Service, 12/28/01
Enron Wins Court Approval for $309 Mln of Asset Sales (Correct)
Bloomberg, 12/28/01

Enron's Woes Cost New York Pension Funds $109 Mln, Paper Says
Bloomberg, 12/28/01

Bush `Concerned,' Says Government Must Look Into Enron Collapse
Bloomberg, 12/28/01





International
Trickier Times for Europe's Banks in 2002 --- Drop in Investor Confidence And Rise in Bankruptcies Set to Hurt Earnings
By Marcus Walker
Staff Reporter of The Wall Street Journal

12/28/2001
The Wall Street Journal
A6
(Copyright (c) 2001, Dow Jones & Company, Inc.)

FRANKFURT -- After a tricky 2001, European banks could find life getting tougher still in 2002. 
Banking analysts say a combination of economic stagnation, rising corporate bankruptcies and low confidence among retail investors is likely to hurt many banks' earnings in the coming year.
Since mid-2000, when the U.S. economic slowdown spread to Europe -- and in particular to its largest economy, Germany -- European banks have tried to reassure investors about their corporate clients' credit-worthiness. Although banks in the United Kingdom, France and elsewhere have had to set aside only modest amounts to cover bad loans so far, loan-loss provisions were partly responsible for quarterly operating losses among some of Germany's biggest banks. Now the fear is that the German syndrome will spread. 
"The asset-quality downturn has only just started," says Mark Hoge, an analyst at Bank of America in London. So far, he says, the global economic downturn has pushed only a small number of weak or heavily indebted companies into bankruptcy or financial crisis, such as energy trader Enron Corp. and Swissair Group. The next stage will be loan defaults by small and midsize companies, which form the backbone of several European economies, including Germany's. "You will get a broad deterioration of the bread-and-butter lending business next year," he says. 
European banks have as much as six trillion euros ($5.3 trillion) of loans outstanding, and next year they are likely to lose about 38 billion euros of those assets, or 0.73%, according to Davide Serra, a Morgan Stanley analyst in London. That is three times as high as in the past three to four years, but historically speaking, it is still a low figure. In the recession of the late 1980s and early 1990s, banks wrote off over 1% of loans. Still, Mr. Serra says the impact of bad loans is severe: Every 0.1% of loans written off reduces European banks' profit by 5% to 6%. 
Banks could suffer if troubles at indebted large corporations multiply. In the past year, business fortunes collapsed rapidly at a small number of high-profile companies, including airlines Swissair and Sabena and telecommunications-equipment maker Marconi PLC. German bankers are growing nervous that the heavy debts of Bavarian media company Kirch Group could trigger the next emergency restructuring. 
The number and impact of large corporate collapses are "a lumpy phenomenon that you can't forecast in a systematic way," Mr. Serra says. Corporate failures tend to lag behind economic slowdowns by 12 to 18 months -- which means they are likely to rise in Europe next year, he says. 
Many of Europe's banks have been trying to reduce their reliance on traditional corporate lending by expanding into asset management and retail brokerage activities. Two years ago, it looked as though Europeans' newfound enthusiasm for buying stocks, including those in high-profile privatizations and technology industries, would give the region's banks the new source of nonloan revenue they were seeking. But a generation of first-time retail investors learned a lesson in risk when the tech bubble burst earlier this year. 
Europe is still expected to develop a U.S.-style equity investing culture over time, driven in particular by the growth of a long-term savings market as Europeans move to private pension funds. The Jan. 1 introduction of euro notes and coins will create a pan-European financial-services market over time. But for the moment, Europeans have fallen out of love with stocks, as shown by the depressed earnings of brokerage and funds units at most European banks in 2001. 
Analyst don't expect investor confidence to return quickly. John Leonard, an analyst at Schroder Salomon Smith Barney in London, compares the situation to the U.S. in the year after the stock-market crash of 1987, when retail investors' losses made them wary of returning to the fray even after the first signs of recovery. 
Fear of getting involved in troubled banking markets could also keep the U.K.'s banks on the sidelines, despite their long search for European partners. Lloyds TSB in particular has long talked about a European merger and has held advanced but inconclusive talks during the past year with the Benelux-based insurance and banking group Fortis NV and Germany's Deutsche Bank AG, according to people familiar with the matter. But Lloyds's shareholders are likely to be skeptical about a deal that would mix up the banks' relatively robust earnings in the U.K. retail market with the problems spreading across Europe. 
Opportunities for European deals in the coming year appear scarce. A foreign bid for a French bank such as Societe Generale SA would be highly sensitive amid France's presidential election campaign, for example. Germany's faltering economy makes its banks unappealing. 
"You would really need your head examined to be buying into something like Commerzbank in a recession in Germany when you don't know how long it's going to last," says Mr. Hoge of Bank of America. 
--- Bank Books

Fundamentals among banks doing business in Europe in 2001

Market % Change Estimated
Value in Since 2001 Return
Billions Jan. 2001 on Equity

HSBC $112 + 8% 16%
UBS 67 +35 13
Royal Bank of Scotland 64 +25 15
Lloyds TSB 57 +28 22
Barclays 53 +31 19
Credit Suisse 49 +14 8
ING 47 -20 8
Deutsche Bank 42 + 6 7
HBOS 41 +55 15
BBVA 40 +10 12

Source: Morgan Stanley research estimates

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	



Great Expectations: Did Greenspan Push High-Tech Optimism On Growth Too Far? --- Some He Won Over at Fed Have Second Thoughts; At Stake: Interest Rates --- Bank Took `a Bit of a Risk'
By Greg Ip and Jacob M. Schlesinger
Staff Reporters of The Wall Street Journal

12/28/2001
The Wall Street Journal
A1
(Copyright (c) 2001, Dow Jones & Company, Inc.)

WASHINGTON -- Five years ago, Alan Greenspan began pushing a reluctant Federal Reserve to embrace his New Economy vision of rapid productivity growth and rising living standards. 
Today, Fed policy makers are debating whether they went too far. The answer could help determine whether the current recession marks a temporary aberration in an era of swift growth, or whether the rapid growth of the late 1990s itself was the aberration.
Mr. Greenspan hasn't lost the faith. "New capital investment, especially the high-tech type, will continue where it left off," he declared in a speech last month at Rice University in Houston. He ignored the collapse of so many symbols of the 1990s boom, including Enron Corp., the sponsor of the "distinguished public service" award he received that evening. "The long-term outlook for productivity growth, as far as I'm concerned, remains substantially undiminished," the Fed chairman asserted. 
But others at the central bank -- many of whom only belatedly embraced their leader's optimistic views at the peak of the boom -- now have re-embraced a less-sanguine view. During 2001, the Fed's research staff has steadily marked down its estimate of the rate at which the economy can grow during the next two years without sparking inflation. The economic aftermath of Sept. 11 has only darkened the picture further, as companies shift resources away from boosting efficiency and toward improving security. 
Recent events have "forced a reassessment of the prospects for longer-term productivity growth," Fed governor Laurence Meyer said in a relatively downbeat speech in St. Louis just two weeks after Mr. Greenspan's sunny comments in Houston. Where Mr. Greenspan emphasized the prospect of a healthy rebound in computers, Mr. Meyer stressed that the "frenzied pace of investment in high-tech equipment [in the late 1990s] now appears to have been unsustainable." 
The exchange between Messrs. Greenspan and Meyer signals an intellectual contest at the Fed with huge stakes. If the buoyant Greenspan view prevails, the Fed might hold down interest rates longer, until strong growth resumes, not fearing a flare-up of inflation. The gloomier perspective could lead the Fed to raise rates more quickly to avoid fueling inflation -- or reinflating a bubble -- with expectations of brisk growth. 
The Fed's outlook also matters for congressional decisions on taxes and spending. Mr. Greenspan's assurances of a rapid-growth future helped create a consensus in Washington earlier this year about the inevitability of large federal budget surpluses -- and the affordability of President Bush's big tax cuts. 
The Fed's growth debate amounts to an argument over what kind of economy America can look forward to once the recession ends: one of rapidly rising living standards, low inflation, low interest rates, and federal budgets in reasonable balance -- like that in most of the 1950s and 1960s -- or a much-less-robust version. 
Mr. Greenspan's contention -- that since 1995, the U.S. has shown the ability to expand productivity at an accelerated rate, without demand for goods and services outrunning supply and igniting inflation -- is now so widely accepted as to seem mundane. But just five or six years ago, it was considered revolutionary. Mr. Greenspan was one of the first respected analysts to make the case. 
The key to this whole discussion is productivity, which economists define as a worker's -- or nation's -- output, divided by the relevant number of hours of labor. The pace of growth in gross domestic product is essentially equivalent to the productivity-growth rate added to the rate of expansion of the labor force (which economists assume to be about 1% a year). 
As far back as 1993, Mr. Greenspan has said, he noted a surprising surge in companies' capital-goods orders. He speculated that companies were enjoying unusual gains in productivity, or efficiency, from the new equipment, much of which was high-tech. As his conjecture hardened into conviction, he concluded the greater productivity would permit the economy to grow faster without demand getting out of sync with supply. The Fed could hold back on raising rates longer without fear of fueling inflation. 
Alan Blinder, who challenged the central bank's high-rates stance when he joined the seven-member Fed board as vice chairman in 1994, was pleasantly surprised by Mr. Greenspan's switch to endorsing lower rates in 1995. But Mr. Blinder was nervous about the chairman's reasoning. At a Fed policy meeting in December 1995, Mr. Blinder backed Mr. Greenspan's bottom line on interest levels -- but "without signing onto your brave new world scenario," according to official transcripts of the gathering. 
Mr. Meyer, an economic forecaster and consultant who joined the Fed in 1996, was uncomfortable with the low-interest-rate approach and the Greenspan notion that basic changes in the economy would allow it to grow faster without sparking inflation. In a January 1998 speech, he branded the prior year's growth spurt "unsustainable." 
The Fed's own research staff had Greenspan doubters. Economist Daniel Sichel's 1997 book, "The Computer Revolution," punctured tales of companies using new technology to boost workers' productivity to permanently higher levels. Mr. Sichel crunched numbers to show that for all the attention computers received in the 1990s, they represented such a tiny portion of the nation's capital stock -- 1.1% -- that they couldn't possibly make a big difference. 
In their internal forecasts during most of the 1990s, the Fed staff argued that the economy couldn't average overall growth of much more than 2.5% a year without kindling inflation. The problem for the staff and other Greenspan skeptics was that Commerce Department estimates of actual annual growth for 1996, 1997 and 1998 were, respectively, 3.6%, 4.4% and 4.3% -- while inflation remained dormant. 
Michael Prell, who ran the Fed's research department during this period, tried to explain much of the high overall growth rates as a function of temporary factors, not new efficiencies. Perhaps, he argued to colleagues, companies were coaxing more output from their workers simply because the companies couldn't hire quickly enough. 
A member of the bank's rate-setting committee skeptically attributed a portion of the growth rates to employees "running to the elevators": Workers at companies meeting heavy customer demand were simply exerting themselves more, the official told colleagues. This wasn't a fundamental change, the committee member said. It was a temporary phenomenon that would taper off as the economy inevitably cooled. 
Outsiders also attacked the Greenspan view. At a meeting the chairman hosted in April 1999, Paul Romer, a Stanford University economist, displayed a chart of productivity during the past 100 years. "People in Silicon Valley are talking about hockey-stick growth curves," compared with the 1970s and 1980s, Prof. Romer recalls telling the attendees. But in fact, the improvement of the previous three years wasn't such a historical anomaly, he pointed out. The U.S. had racked up even more impressive growth rates in the 1960s. 
Mr. Greenspan didn't confront Mr. Romer at the time. The chairman rarely, if ever, engaged doubters directly in debate. Instead, at policy meetings, he periodically pointed out how frequently in-house forecasters' projections in the late 1990s had failed to match subsequent actual growth and inflation figures, according to people in attendance. 
But gradually, current and former Fed governors and staff members say, they found the views he advocated harder to resist. As Mr. Greenspan's fellow policy makers understood it, his pitch was that the central bank should give his optimistic perspective a chance. "The question was whether or not we should sort of take a bit of a risk," recalls Fed governor Edward Kelley, who is set to step down at the end of the month, after 14 years with the bank. The gamble, he explains, was to let the Greenspan theory "run, and see if this thing is going to be real and have some legs and keep allowing us, for a while at least, to have a very strong [growth rate] and a declining inflation rate." 
The Fed traditionally seeks consensus in fashioning monetary policy. Over the four-year period from 1996 through 1999, Mr. Greenspan persuaded his colleagues, first, not to raise interest rates, and then, when rate increases became inevitable because of inflation fears, to institute them more slowly than many would have wanted. 
Beyond making arguments, Mr. Greenspan helped generate more empirical support for his perspective by pushing an effort to adjust official data that most economists agreed had grown obsolete. After getting a private presentation in the summer of 1996 from Mr. Greenspan and two of his aides, Commerce Department officials accelerated their plans to revise output figures for sectors such as banking. Until the change, the official numbers hadn't shown any improvement in efficiency for banks in the 1990s, despite the proliferation of automatic-teller machines that so obviously allowed branches to conduct more transactions per worker. 
In another initiative, Fed staffers in 1998 created their own tech-industry database, which provided an authoritative account of the accelerating drop in semiconductor prices, beginning in 1995. Economists interpreted the information as a strong sign that chip companies were able to cut prices because they had increased productivity. The new Fed information also suggested that prices of the machines that use semiconductors -- computers -- were also falling, which many economists reasoned would encourage companies to buy more computers. 
"When the Fed began to look at these numbers, the scales fell away from everybody's eyes," says Harvard economist Dale Jorgenson. Computers clearly had become more prevalent since the Fed's Mr. Sichel found them to be such a small fraction of the nation's capital stock. Based on the new data, Mr. Jorgenson published in August 2000 one of the first papers by a respected academic recognizing the contribution of computers to higher growth. 
Mr. Greenspan avidly sought evidence that companies had only barely begun employing new technologies to raise efficiency and pump up productivity. At meetings and cocktail parties, he would sometimes draw a graph on paper representing the spread of tech innovations, and then ask business executives to plot where their companies stood in exploiting these new technologies. 
In a meeting at the Fed's headquarters in the summer of 1999, he prodded officials from the National Association of Purchasing Management to include in their semiannual survey of executives a question about the remaining potential for applying new technologies. They did, and the survey repeatedly found that managers thought they had exploited only half of the potential of high-tech -- a figure Mr. Greenspan then invoked regularly in speeches and congressional testimony to back his claims. 
Mr. Greenspan bombarded his colleagues with anecdotes supporting his view that the economy had fundamentally changed. In October 1995, a group of supply managers from various industries visited the Fed to discuss the latest in high-efficiency "just-in-time" inventory management. Mr. Kelley, the retiring Fed governor and a former businessman, refers to himself as "an old inventory manager." He recalls that one of the visiting supply executives described routing goods to drugstores: "They would load a truck up and without having orders, send the truck out. The drugstore computer system would call the supplier, which would call the truck on the road and say, `Go to such-and-such store and deliver the following items.'" To Mr. Kelley, hearing about this slick system "was like going to Mars." 
By 1999, the official statistics were consistently reflecting the trends that Mr. Greenspan had talked about for several years. Inflation stayed calm even as growth surged. And by then, the bulk of the Fed -- from Mr. Kelley and other policy makers to the staff -- had been converted to New Economy believers, too. 
The once-skeptical Mr. Meyer confessed in a speech in September 1999 that "we can confidently say . . . that, since 1995, actual productivity growth has increased." At the time, he suggested that he believed the economy could annually grow overall by as much as 3% without inciting inflation, up from his longtime prior estimate of a 2.5% limit. Soon thereafter, he indicated that perhaps the right number was 3.5% to 4%. Mr. Sichel, the researcher who had cast doubt on the significance of computers to productivity, co-wrote a paper published in 2000 that said the prevalence of computers had sharply increased, and they were contributing significantly to productivity growth. 
While the doubters were coming around to Mr. Greenspan's basic point of view -- that the economy's speed limit had risen -- the Fed chairman seemed to move even farther out on the limb. At an April 2000 White House conference on the New Economy, he appeared to raise his already-upbeat opinion of how much better the economy could perform. "I see no reason that productivity growth cannot remain elevated, or even increase further," he said. 
Still, Mr. Greenspan is a master politician, as skilled as any Washington figure at hedging his bets and covering himself for all eventualities. While his rhetoric often sounds giddy, he has assiduously avoided ever giving a concrete number -- even to fellow Fed officials -- for maximum sustainable growth. He also often qualifies his more-effusive statements to concede that his high-tech growth theory could be wrong. In one speech in January 2000, he acknowledged that future historians "might well conclude that a good deal of what we are currently experiencing was just one of the many euphoric speculative bubbles that have dotted human history." 
And yet, so persuaded were Mr. Greenspan and his colleagues of his optimistic outlook that they seemed to have trouble accepting the bursting of the high-tech bubble when it happened last year. As business investment weakened in late 2000, Fed officials told one another that technology had proven so valuable to companies that they would likely resume higher purchasing levels soon, Fed minutes show. 
The staff forecast prepared for the December 2000 policy meeting predicted that consumer spending would slow because of falling stock-market wealth. But "business fixed investment, notably outlays for equipment and software, was projected to remain relatively robust," according to the minutes. Mr. Greenspan himself was taken aback in October 2000 by a chart accompanying an article in The Wall Street Journal that showed a huge gap between the rapid growth of fiber-optic capacity and the much-slower growth of demand for the technology, a discrepancy that soon led to the collapse of a raft of start-up broadband companies. 
Early this year, the Fed was cutting interest rates in an effort to keep growth from stalling, while still issuing upbeat statements about the New Economy. "To date there is little evidence to suggest that longer-term advances in technology and associated gains in productivity are abating," the central bank's policy makers said after the first rate cut in early January. 
Some economists now say that because Mr. Greenspan and his colleagues believed so fervently in the fundamental benefits of technology, they didn't recognize that much high-tech spending in the late 1990s was wasted. "Virtually no one, official or outside [the Fed] was talking about the fact that high stock prices were essentially generating too much investment" by businesses in high-tech gear, says Stephen Cecchetti, head of research at the Federal Reserve Bank of New York from 1997 to 1999 and now an economics professor at Ohio State University. 
But as capital spending continued to collapse this winter and spring, the Fed research department's models showed that the economy's potential to grow over the next two years was slipping to about 3% from its estimate of more than 4% in early 2000. (The economists made clear this didn't necessarily affect the longer-run outlook.) 
At the bank's June 2001 policy meeting, time was set aside for special staff presentations on the most recent evidence on productivity and the tech glut. The researchers still agreed with Mr. Greenspan's assertion that productivity was going to be stronger than it had been from 1973 through 1995, but they now said that "how much stronger was an open question," according to the minutes. 
As companies have continued to work off excessive inventories for nearly a year, some Fed officials now believe they placed too much faith in such New Economy tenets as the idea that better supply management could make long downturns less likely. "It has turned out we have had a more-severe economic cycle than I thought we would," says Mr. Kelley. "It has so far looked more like the old days," he says, referring to recessions of past decades. 
In July, it emerged that the statistical foundation of the Greenspan view hadn't been as impressive as it once seemed. Government statisticians recalculated their official estimates for output and productivity in the late 1990s after discovering they had overestimated software sales. For 2000, the overall growth rate was knocked down from an eye-popping 5% to 4.1%. 
The economy's turn-of-the-century performance "was still impressive," Mr. Meyer said in his speech in late November. But "it was less exceptional than it had appeared before." 
The big question now is which view of the economy's potential performance will prevail in coming years. If a new pessimism takes root at the central bank -- if officials come to regret their Greenspan-inspired experiment of the 1990s -- the Fed may be more inclined to rein in growth. If the influential chairman maintains his optimism and that of his colleagues, the bank may try harder to restore the 1990s boom. 
--- 
Question of the Day: Is there a New Economy? Visit WSJ.com/Question to vote.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Editorial Desk; Section A
Could've Been Worse
By PAUL KRUGMAN

12/28/2001
The New York Times
Page 19, Column 1
c. 2001 New York Times Company

It has not been a good year for economic policy, at home or abroad. The best you can say is that things could have been worse. 
The bad news was legion. The U.S. went into recession, and the collapse of Enron raised questions not only about our economy but about the state of business ethics. We squandered our hard-won budget surplus, and with it our best chance to do something about the fiscal burdens of an aging population, on an ill-conceived tax cut. Overseas, Argentina melted down -- something I had long predicted, but the actual events were still shocking. And Japan's prime minister, Junichiro Koizumi, looks less like Franklin Roosevelt and more like Herbert Hoover every day.
The good news all takes the form of things that didn't happen. 
The good news about the U.S. economy is that it fell into recession, but it didn't fall off a cliff. Most of the credit probably goes to the dogged optimism of American consumers, but the Fed's dramatic interest rate cuts helped keep housing strong even as business investment plunged. The pain is far from over -- unemployment looks set to keep on rising, even if the G.D.P. starts growing again -- but our worst fears have not been realized. 
It was good news that the World Trade Organization didn't collapse. Trade is one area in which the Bush administration is right and the Democrats are wrong; but there was a real risk that the 1999 debacle in Seattle, where an attempt to start a new round of negotiations collapsed in disarray, would be repeated this year. In fact the meeting, in Doha, Qatar, went off fairly well. Alas, I cannot take any satisfaction in the passage of ''fast track'' trade authority: as Lael Brainard pointed out on this page yesterday, the Bush administration purchased fast-track at the cost of appalling concessions to special interests, concessions that hurt the very countries free trade is supposed to help. 
It was good news when California's energy crisis evaporated, thanks to price controls and conservation. The Bush administration was all set to use the crisis to push through an environmentally destructive program of corporate welfare, which had nothing to do with the actual problem; the sudden surplus of power put that plan on hold. 
Really big good news: To my immense relief, the absurdity of Social Security privatization became manifest before the system had been dismantled. I had been really worried about that; the Bush administration's claim that private accounts would improve rather than worsen the system's finances made no sense at all, yet it got a free pass from most commentators. 
Fortunately, the commission that was supposed to propose a detailed plan came to a farcical end. Its final report declared that private accounts would indeed strengthen Social Security, if they were accompanied by sharp benefit cuts and huge financial injections from unspecified sources. Yes, and eating a jelly doughnut every morning will help you lose weight, if you also cut back sharply on other foods and do a lot of exercise; otherwise the doughnuts will make you fatter. Again, aren't you glad the absurdity of the Bush proposal came to light before $1 trillion was diverted into private accounts? 
And one more thing to be grateful for: We didn't get a stimulus bill. That doesn't sound like good news, unless you look at the content of the bills that were actually on the table: huge further tax breaks for corporations and the wealthy, doing little for the economy but further worsening our already dreary fiscal outlook. 
But what about the year ahead? 
For me the gloomiest moment was probably around mid-October. That's when the straight economics looked worst -- when the impact of Sept. 11 on confidence seemed all too likely to turn the recession into something truly nasty. It was also the moment when some politicians decided to abandon all restraint, and throw their weight behind huge special-interest giveaways. But guess what? Confidence didn't collapse, and the special interests didn't get what they wanted. It turns out that there are still decent politicians, in both parties, and so far they have had enough power -- just -- to prevent the worst. 
In short, things could have been worse, and there is still reason to hope. Happy New Year.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Business/Financial Desk; Section C
JDS Set the Record, but It May Not Be 2001's Biggest Loser
By FLOYD NORRIS

12/28/2001
The New York Times
Page 1, Column 2
c. 2001 New York Times Company

CALL it the year of good will gone bad. Never in history has so much in intangible assets been wiped off balance sheets as companies were forced to acknowledge that they had made some very bad acquisitions. 
But records are made to be broken, and accountants and appraisers say that companies are lining up to announce huge write-offs in 2002.
Until this year, the worst annual performance for an American corporation was the $23.5 billion loss posted by General Motors in 1992, largely because of an accounting change that forced it to recognize the costs of health care for retired workers. But that record was smashed by JDS Uniphase, which lost $56.1 billion in its fiscal year that ended June 30. Of that, more than $51 billion came from writing off the costs of bad acquisitions and investments. 
As a symbol of the age, that was perfect. When G.M. set the record, it was an American icon, and its net loss that year came to just one-sixth of its annual revenue. JDS Uniphase, a maker of telecommunications equipment, is not known to most Americans, and for good reason. Its 2001 loss was about 10 times as large as its lifetime revenue. 
JDS never saw $50 billion in cash, but it could lose that much because it was blessed, for a time, with an overvalued stock, which it used to buy overpriced companies. After the bubble burst, the accountants acted as if JDS had spent real money. 
Another 2001 record breaker, Enron, did spend real money. Its bankruptcy set the record as the largest in American history in terms of assets. It managed to go broke without ever reporting a bad quarter, at least not as measured by the ''pro forma'' earnings that Wall Street relied upon until it was too late. 
Enron will now report huge losses. And, reports Alfred King, the co-chairman of the Valuation Research Corporation, it will not be alone. 
''A lot of write-downs are coming'' early in 2002 and will involve hundreds of billions of dollars, Mr. King told a recent New York University seminar on the new merger accounting rule that has just taken effect. Appraisal firms like his have been inundated with business from companies seeking advice on how much to write off. 
The rule says good will from mergers must be written off if the business unit containing the acquired company is worth less than book value, including the good will taken on as part of the acquisition. Companies have some leeway in determining whether a write-off is needed, but it appears that many of them want to take their write-offs quickly, when they can blame a change in accounting rules. 
After the 2002 baths are taken, the usefulness of the new merger rule for investors will depend on whether it forces companies to take losses quickly when a deal goes wrong, or whether companies can postpone the bad news until years later, after problems are clear to all. 
There is a sense in which JDS did not suffer 2001's largest loss, nor did Enron. The biggest loss of good will may have been suffered by the accounting profession. The Big Five accounting firms are clearly worried, and they are scrambling to come up with a quick fix to improve disclosures of off-balance sheet debts, related-party transactions and market risks relative to commodity prices. In other words, all the things that Enron hid until it collapsed. 
The worry among accountants is that investors who were willing to shrug off accounting scandals during the bull market may now be less tolerant. Whether that proves to be the case will be one thing to watch in 2002.

Chart: ''JDS Uniphase'' Results, in millions. Fiscal years ended June 30. '97 REVENUE: $113 LOSSES: $18 '98 REVENUE: 185 LOSSES: 20 '99 REVENUE: 283 LOSSES: 171 '00 REVENUE: 1,430 LOSSES: 905 '01 REVENUE: 3,233 LOSSES: 56,122 
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	



LETTERS TO THE EDITOR - Power traders necessary for efficiency.
By BERNARD WEINSTEIN.

12/28/2001
Financial Times
(c) 2001 Financial Times Limited . All Rights Reserved

From Prof Bernard L. Weinstein. 
The collapse of Enron is a serious blow to its employees and to the city of Houston. But claims by some politicians and pundits that the electric power industry does not need such companies to make a market are ridiculous. For consumers and businesses to get full benefit from deregulation and retail competition, the activities of power traders such as Enron, Dynegy, Calpine and Reliant are critical.
Enron may have overreached and made strategic blunders but this is often the case when a formerly regulated industry restructures and one company attempts to "get ahead of the curve". Braniff Airlines is one example. When the airlines were deregulated in the early 1980s, Braniff pursued a programme of rapid domestic and international expansion. Unable to generate sufficient passenger revenue to cover its higher fixed costs and operating expenses, Braniff went bankrupt in two years. Southwest Airlines took a more deliberate approach to route expansion and became the most profitable airline in the US. The trucking and telecommunications industries have also witnessed dramatic failures by companies growing too fast, too soon after deregulation. Trucking giant McLean raced ahead of the pack during the initial impetus of deregulation in 1980, only to collapse several years later. A similar fate befell ClayDesta Communications, which aspired to become a rival to AT&T during the early years of telecoms deregulation. As with other restructurings, it will take time for the electric power industry to sort itself out. This has been the case in Britain, where the push for competitive power markets began in the late 1980s. Few gains were recorded in the first years but by the mid-1990s consumers and businesses began to reap significant benefits. Today, electricity prices are down a third and about 30 per cent of customers have switched providers. Unfortunately, some state legislatures are citing the Enron case as a reason to slow down or derail electric power deregulation, while Congress is considering legislation severely to restrict the activities of power traders. Such measures would be a serious mistake. Power traders are the "middlemen" who make markets work and ensure they operate efficiently. Spot purchases and sales can spread lower power costs across a wide geographic market in the short term while traders who sell long-term contracts reduce risks for utilities and ratepayers by providing price certainty. Enron may or may not survive as a corporate entity. But a vibrant market for power trading remains the key to ensuring that utilities, businesses and customers benefit from deregulation and competition in electricity. 
Bernard L. Weinstein, Professor of Applied Economics and Director, Centre for Economic Development and Research University of North Texas, Denton, Texas US. 
(c) Copyright Financial Times Ltd. All rights reserved. 
http://www.ft.com.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

California
Commentary An Enron Tale of Strange Bedfellows
ALEXANDER COCKBURN

12/28/2001
Los Angeles Times
Home Edition
B-17
Copyright 2001 / The Times Mirror Company

The fall of Enron sounds the death knell for one of the great rackets of the last decade: the "Green Guys" seal of approval, whereby some outfit such as the Natural Resources Defense Council or the Environmental Defense Fund would issue testimonials to the enviro-conscience and selfless devotion to the public weal of corporations such as Enron. This approbation was part and parcel of the neoliberal pitch that fuddy-duddy regulation should yield to modern, "market-oriented" inducements to environmental good behavior, and the NRDC and EDF were the prime salespeople. 
The NRDC's deep involvement with the Enron lobby machine is a case in point. Here's what happened: In 1997, high-flying Enron was in a pitched battle in Oregon, where it planned to acquire Portland General Electric, the state's largest public utility. Warning that Enron's motives were of a highly predatory nature, the Public Utilities Commission staff opposed the merger. They warned that an Enron takeover would mean less protection for the environment, increased insecurity for Portland General's workers and, likely, soaring prices. There also was the issue of decommissioning Portland General's Trojan nuclear plant.
Other critics argued that Enron's actual plan was to cannibalize Portland General, in particular its hydropower, which Enron would sell in California's energy market. 
But as such protests threatened to deprive Enron of its prize, into town rode the NRDC's top energy commissar, Ralph Cavanagh, flaunting his ties to the Energy Foundation, a San Francisco-based outfit providing the financial wattage for many citizen and environmental groups. Cavanagh lost no time in whipping the refractory greens of Oregon into line. In concert with Enron, he put together a memo of understanding that pledged that the company would lend financial support to some of these groups' pet projects. But he had arduous politicking ahead. Approval for the merger had to come from the PUC, whose staff was opposed. So, on Feb. 14, 1997, Cavanagh showed up at a hearing in Salem, Ore., to plead Enron's case. 
Addressing the PUC, he averred that this was "the first time I've ever spoken in support of a utility merger." If so, it was one of the quickest transitions from virginity to seasoned performance in the history of intellectual prostitution. Cavanagh touted the delights of an embrace with Enron: "What we've put before you with this company is ... a robust assortment of public benefits for the citizens of Oregon, which would not emerge without the merger." He then moved into rhetorical high gear: "The Oregonian [newspaper] asks the question, 'Can you trust Enron?' On stewardship issues and public benefit issues, I've dealt with this company for a decade, often in the most contentious circumstances, and the answer is, yes." 
The PUC approved the merger, and it wasn't long before the darkest suspicions about Enron's plans were vindicated. The company raised rates, tried to soak ratepayers with the cost of its failed Trojan nuclear reactor and moved to put some of the company's most valuable assets on the block. 
Enron's motive had indeed been to get access to the hydropower of the Northwest, the cheapest in the country, and to sell it in the California market, the priciest and, in part because of Cavanagh's campaigning for deregulation, the ripest for exploitation. Two years later, the company Cavanagh had hailed as "engaged, motivated and committed" put Portland General on the auction block. 
Today, some House Republicans want to treat the Enron collapse as a criminal matter, while Democrats talk about cleaning up accounting rules and plugging holes in the regulatory system. The outrage over the inability of Enron employees to sell company stock from their 401(k) plans while higher-ups absconded with millions may doom President Bush's promised onslaught on Social Security. 
There are many morals in Enron's collapse, and the role of the Green Guys seal of approval shouldn't be forgotten. 
* 
Alexander Cockburn writes for the Nation and other publications.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

California
Despite the Shock, Davis Kept the Lights On

12/28/2001
Los Angeles Times
Home Edition
B-16
Copyright 2001 / The Times Mirror Company

Re "Let Consumers Shop for Cheaper Energy," Commentary, Dec. 20: Fixated as he is on nit-picking Gov. Gray Davis' solutions to the energy crisis, Tom McClintock misses the most vital fact: The governor's quick and aggressive actions kept the lights on. He protected ratepayers from the brunt of the outrageous price manipulations of the out-of-state generators. He secured a reliable energy supply for the state's long-term future and goaded the Federal Energy Regulatory Commission into waking to its legal role as a regulator. 
McClintock says Davis didn't lift a finger to deal with skyrocketing natural gas prices, forgetting, apparently, that gas prices dropped only after President Bush agreed to the governor's call for an investigation last spring.
He forgets that it was not Davis who froze customer rates. That freeze was part of the original deregulation law. The utilities wholeheartedly supported the freeze because the rate allowed them to make substantial profits for several years. In opposing large retail rate increases, Davis stated firmly that residential customers hadn't asked for deregulation, hadn't wanted it and shouldn't be victims of its failure. 
McClintock claims that left alone, energy prices would have settled down. Yet he fails to note that energy prices shot up most dramatically in December 2000, when FERC freed them from price controls, and they did not settle down until the Davis administration had negotiated enough long-term contracts to end dependence on the spot market. Finally, McClintock cites NewPower Holdings as an exemplar of electricity market competition in Texas. However, Newsweek maintains that NPH, an Enron spinoff, was one of the "deals that sank Enron." This underscores the precarious nature of the electricity market--which Enron customers in California know all too well. 
David Freeman 
Chairman, Consumer Power 
and Conservation Financing 
Authority, Sacramento

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Business; Business Desk
IN BRIEF / ENERGY Enron Bankers Delay Deadline for Financing
Bloomberg News

12/28/2001
Los Angeles Times
Home Edition
C-4
Copyright 2001 / The Times Mirror Company

Enron Corp.'s bankers gained a 23-day delay of a deadline to get commitments for $1 billion in financing the energy trader said it needs to stay in business after filing the largest Chapter 11 bankruptcy. 
A hearing on the financing in Bankruptcy Court in New York was postponed from Jan. 7 to Jan. 30, said to Martin Bienenstock of Weil Gotshal & Manges, which represents Enron.
"We have a lot of asset sales going on and don't have an immediate need for additional funds," Bienenstock said. 
Bankers at J.P. Morgan Chase & Co. and Citigroup Inc. have been working to persuade lenders, including Bank of America Corp., UBS and Deutsche Bank, to take part in a $1.5-billion loan. 
In a related proceeding, Enron will auction off a controlling stake in its energy-trading business at a hearing set for Jan. 10. 
Internet-based trading generated about 90% of Enron's $101-billion revenue last year. 
Enron shares, which began the year at $83.13, fell 5 cents to 60 cents on the NYSE.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	



USA: Enron stock has rising value for collectors.
By Philip Klein

12/28/2001
Reuters English News Service
(C) Reuters Limited 2001.

NEW YORK, Dec 28 (Reuters) - Enron Corp.'s stock is rising once again - but don't look for its rebound in Standard & Poor's 500 index listings. 
Now it's joined a much more select group that includes stocks and bonds from Czarist Russia, Victorian railroads and countries that no longer exist: Collectors have been snapping up Enron stock certificates as artifacts of the company's spectacular collapse, not on hopes for a recovery.
While Enron's shares were at 58 cents in Friday trading on the New York Stock Exchange, the physical stock certificate was selling for much more, fetching as much as $99.95 on the Internet. 
"It's one of the biggest bankruptcies ever and is quite a collectible," Bob Kerstein, president of a Scripophily.com, a Web site which specializes in selling old stock and bond certificates said on Thursday. 
Kerstein said he sold four of the certificates to a hedge fund manager who made a fortune selling Enron stock short. Now the investor plans to give the certificates out as gifts and display a framed one on his wall, like a stuffed deer head hanging on the wall of a hunter's study. 
The Enron certificate is blue and white, with an etched drawing of a brawny man in a hard hat sitting in the foreground of an oil field and a printed signature of Chief Executive Officer Kenneth Lay in the bottom right corner. 
"We just put it up today and we already sold five of them," Kerstein said. "A company like Enron everybody wants." 
Kerstein, whose Web site sells certificates ranging from 19th Century Railroad bonds to recent dead dot-coms such as WebVan, said that he could have sold 100 Enron certificates over Christmas if he had them on hand. 
Collectors of old stocks and bonds, who call their hobby scripophily or 'love of ownership,' seek out certificates that have aesthetic value, contain rare signatures or have historical significance. 
"People are always seeking a piece of history that says something about the time" Kerstein said. "Enron says a lot." 
Enron's stock, which traded at $90.75 at its height in August 2000, hit a low of 25 cents earlier this month as the company spiraled toward the biggest bankruptcy filing in U.S. history. While investors can still buy the stock at 58 cents, Kerstein justifies his price by citing brokers fees and charges for issuing physical certificates. 
Unlike trading on the exchange, the pricing for the certificates is inexact and can vary by condition and other factors. Enron certificates were being bid on eBay Inc.'s auction Web site for as low as $19. 
Enron's transfer agent EquiServe Inc. said that in September through November it received requests to issue an average of 580 Enron certificates per month, but has received 3,500 in December alone, because of the interest generated by the bankruptcy filing. 
Thomas Carroll, who is the director of sales and marketing for satellite launching company International Launch Services, a joint venture of Lockheed Martin Corp. and Russia's Khrunichev Space agency, has been collecting stock certificates for over a year. He just bought the Enron certificate for sentimental reasons. 
"I was on the site this morning, and when I saw it I knew I needed to have it," he said. Back when Enron was Houston Natural Gas, he worked for a different satellite company that helped transmit data on the rate of growth of rust in pipelines. 
But stock certificates are not the only piece of Enron nostalgia out there, as the company's collapse is spawning an industry of its own. 
On eBay Inc.'s auction website, people are selling Enron watches, Yo Yo's and mugs. Several parody Web sites have also been set up by ex-Enron workers who are fed up with the company after seeing their 401(k) plans dwindle to a fraction of their value as shares of the company's stock plummeted. 
The Web sites, laydoff.com, enronx.com and thecrookede.com sell T-shirts with slogans such as, "I got laid off from Enron and all I got was this lousy T-shirt," "The Execs that Stole Christmas" and "I got Lay'd by Enron," a reference to the company's CEO Ken Lay. 
When told about what Enron certificates were selling for, company spokeswoman Karen Denne couldn't suppress a laugh. 
"That's a better price than Enron was selling for on its best day," Denne said.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	


USA: Bush says 'deeply concerned' about Enron collapse.

12/28/2001
Reuters English News Service
(C) Reuters Limited 2001.

CRAWFORD, Texas, Dec 28 (Reuters) - U.S. President George W. Bush said on Friday he was "deeply concerned" about financial losses suffered by employees of fallen energy trading giant Enron Corp. , which earlier this month made the largest bankruptcy filing in U.S. history. 
"I'm deeply concerned about the citizens of Houston who worked for Enron who lost life savings. It's very troubling to read the stories about the ones ... who had their Enron stock locked up in their 401(k) plans," Bush said at a televised press conference on his ranch in Crawford, Texas.
The president also said he had not been in recent communication with company executives, who were among major supporters of his election campaign. 
"I have had no contact with Enron officials in the last six weeks," Bush said in response to a reporter's question. 
"The government will be looking into this. The SEC (Securities and Exchange Commission) will be looking into the matter. Congress appears to be looking into the matter. There will be a lot of government inquiry into Enron and what took place there," Bush said. 
Enron, based in Houston, is under investigation by the market-regulating SEC, the departments of Justice and Labor and at least four congressional committees. 
"It's very important for us to fully understand the whys of Enron. There will be plenty of investigations," Bush said. 
A Wall Street darling just a few months ago, Enron on Dec. 2 made the largest bankruptcy court filing in U.S. history after a rescue takeover by rival Dynegy Inc. fell apart amid investor concerns about Enron's murky finances. 
Once ranked No. 7 on the Fortune 500 list of top companies, Enron's stock was trading at 58 cents a share at midday on the New York Stock Exchange, off an August 2000 high of $90.56. 
Thousands of Enron employees have lost their jobs and much of their retirement savings. A 401(k) retirement plan that made many of them heavily dependent on company stock came under fire at a recent congressional hearing when employees said they were unable to sell their holdings when the stock price plunged.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Enron Seeks Bankruptcy Court Approval for Asset Sales by Year-End
By Christina Cheddar

12/28/2001
Dow Jones Business News
(Copyright (c) 2001, Dow Jones & Company, Inc.)

Dow Jones Newswires 
NEW YORK -- Enron Corp. has asked the judge overseeing its bankruptcy case to approve the sale of several hundred million dollars worth of assets by the end of the year.
The assets were earmarked for sale more than a year ago as part of Enron's efforts to focus on its core energy trading business, according to papers filed Friday with the U.S. Bankruptcy Court in New York's southern district. 
In one transaction, Enron (ENE) is trying to sell two wind power generating facilities in West Texas, Indian Mesa and Clear Sky, for $175 million to American Electric Power Inc. (AEP), of Columbus, Ohio. 
The generating facilities are owned by its Enron Wind Development Corp. unit, which wasn't part of Enron's bankruptcy filing in early December. 
According to documents filed with the court, AEP said the deal must be completed by Friday. Otherwise, the total value of the transaction will be reduced by at least $6 million to reflect tax benefits AEP will lose. 
Separately, Enron also wants the court to approve Enron Canada Power Corp.'s plan to sell its interest in electricity generated by the Sundance power generation plant in Alberta, Canada, for 215 million Canadian dollars (US$134.6 million) to a partnership operated by AltaGas Services Inc. and TransCanada Pipelines Ltd.'s (TRP) TransCanada Energy unit. 
Enron had originally expected the deal to close in the first quarter, but the company now wants to expedite the sale in order to stave off a default at the Canadian unit. 
Although the Canadian unit remains outside Enron's bankruptcy filing, its parent's Chapter 11 status has led some of Enron Canada's third-party creditors to ask the unit to post security to back some of its contractual obligations. 
In the filing, Enron Canada said it is concerned that if it can't meet these requirements and doesn't post security, it will be forced into an involuntary bankruptcy proceeding, which in turn would trigger a default under its Sundance agreement. 
If this were to occur, Enron said the Sundance assets would be "worthless." 
Enron said its ability to reorganize successfully is connected to its ability to sell the assets owned by its units that remain outside its bankruptcy case. 
As of last Wednesday, 23 of Enron's units have filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code. About 3,500 other Enron entities remain operating worldwide, outside of bankruptcy court protection. 
Still, as a result of the bankruptcy filing, several purchasers of some of Enron's solvent assets have conditioned the closing of the divestitures on Enron's ability to get bankruptcy court approval for the deals. 
These transactions include Enron's sale of Enron Oil & Gas India Ltd. to BG Group PLC (BRG) for $388 million, and the sale of Enron LNG Power Atlantic to an undisclosed buyer for $266 million, the company said in a filing with the court. 
Write to Christina Cheddar at christina.cheddar@dowjones.com 
Copyright (c) 2001 Dow Jones & Company, Inc. 
All Rights Reserved.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Enron Seeks Court OK For Asset Sales By Year-End
By Christina Cheddar

12/28/2001
Dow Jones News Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)

Of DOW JONES NEWSWIRES 

NEW YORK -(Dow Jones)- Enron Corp. (ENE) has asked the judge overseeing its bankruptcy case to approve the sale of several hundred million dollars worth of assets by the end of the year.
The assets were earmarked for sale more than a year ago as part of Enron's efforts to focus on its core energy trading business, according to papers filed with the U.S. Bankruptcy Court in New York's southern district. 
In one transaction, the company is trying to sell two wind power generating facilities in West Texas, Indian Mesa and Clear Sky, for $175 million to American Electric Power Inc. (AEP), of Columbus, Ohio. 
The generating facilities are owned by its Enron Wind Development Corp. unit, which wasn't part of Enron's bankruptcy filing in early December. 
According to documents filed with the court, AEP said the deal must be completed by Friday. Otherwise, the total value of the transaction will be reduced by at least $6 million to reflect tax benefits AEP will lose. 

Separately, Enron also wants the court to approve Enron Canada Power Corp.'s plan to sell its interest in electricity generated by the Sundance power generation plant in Alberta, Canada, for C$215 million to a partnership operated by AltaGas Services Inc. (T.ALA) and TransCanada Pipelines Ltd.'s (TRP) TransCanada Energy unit. 
Enron had originally expected the deal to close in the first quarter, but the company now wants to expedite the sale in order to stave off a default at the Canadian unit. 
Although the Canadian unit remains outside Enron's bankruptcy filing, its parent's Chapter 11 status has led some of Enron Canada's third-party creditors to ask the unit to post security to back some of its contractual obligations. 
In the filing, Enron Canada said it is concerned that if it can't meet these requirements and doesn't post security, it will be forced into an involuntary bankruptcy proceeding, which in turn would trigger a default under its Sundance agreement. 
If this were to occur, Enron said the Sundance assets would be "worthless." 
Enron said its ability to reorganize successfully is connected to its ability to sell the assets owned by its units that remain outside its bankruptcy case. 
As of last Wednesday, 23 of Enron's units have filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy code. About 3,500 other Enron entities remain operating worldwide, outside of bankruptcy court protection. 
Still, as a result of the bankruptcy filing, several purchasers of some of Enron's solvent assets have conditioned the closing of the divestitures on Enron's ability to get bankruptcy court approval for the deals. 
These transactions include Enron's sale of Enron Oil & Gas India Ltd. to BG Group PLC (BRG) for $388 million, and the sale of Enron LNG Power Atlantic to an undisclosed buyer for $266 million, the company said in a filing with the court. 
-Christina Cheddar, Dow Jones Newswires; 201-938-5166; christina.cheddar@dowjones.com

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Enron Wins Court Approval for $309 Mln of Asset Sales (Correct)
2001-12-28 14:57 (New York)

Enron Wins Court Approval for $309 Mln of Asset Sales (Correct)

     (Corrects amount of sale to $309 million in headline and
first paragraph.)

     New York, Dec. 28 (Bloomberg) -- Enron Corp., the once-
dominant energy trader reorganizing in bankruptcy court, won a
judge's permission to complete two previously planned asset sales
that will raise a total of about $309 million.

     Enron plans to sell two wind-power facilities in Texas for
about $175 million to Columbus, Ohio-based American Electric Power
Co. Enron's Enron Wind Development Corp. unit, which isn't part of
the Houston-based parent's bankruptcy case, owns the power
generating facilities.

     In a separate sale, a partnership run by AltaGas Services
Inc. and TransCanada Pipelines Ltd.'s TransCanada Energy unit will
pay about $134 million for Enron Canada Power Corp.'s right to
electricity from a plant in Alberta, Canada. As with Enron Wind,
the Canadian unit isn't part of Enron's bankruptcy.

     U.S. Bankruptcy Judge Arthur J. Gonzalez in Manhattan
approved Enron's request to proceed with the transactions at a
hearing late Thursday. The sales are scheduled to close today,
according to Enron's bankruptcy attorney, Brian Rosen, of New
York's Weil, Gotshal & Manges. Closing costs and fees will
slightly reduce the overall proceeds from the sales, he said.

     Enron sought Chapter 11 protection from creditors earlier
this month, in the largest bankruptcy filing ever. The company
sought refuge in bankruptcy court after Dynegy Inc. withdrew a $23
billion rescue in late November.

     Shares of Enron, which began the year at $83.13, fell 4 cents
to 56 cents in midafternoon trading. The shares have lost more
than 99 percent of their value in the past year. American Electric
shares rose 4 cents to $43.25.

                             Windmills

     American Electric agreed to buy 107 wind turbines in west
Texas that can generate power for San Antonio, AEP spokesman Tom
Ayres said. Although Enron Wind hasn't sought bankruptcy
protection ``both sides felt that the court should bless'' the
transaction, Ayres said. The windmills can generate enough power
to light about 160,500 average U.S. homes.

     Other purchasers of Enron's assets want the company to gain
court approval for its bankruptcy plan before completing the
transactions. As examples, Enron in court papers cited its
proposed sale of Enron Oil & Gas India Ltd. to BG Group PLC for
$380 million and its proposed sale of Enron LNG Power Atlantic to
an unidentified buyer for $266 million.

     Enron LNG Power Atlantic owns Enron's stake in Eco Electrica,
a power plant and natural gas terminal in Puerto Rico. Mirant
Corp., an Atlanta-based power producer, agreed in July to buy Eco
Electrica from Enron and Edison International which also holds a
stake, for about $600 million.

                        ``Core Operations''

     Mirant Chief Executive Marce Fuller said last week that Dec.
31 is the deadline to complete the transaction. Enron's bankruptcy
made it unlikely the purchase will occur, she said.

     Enron Oil and Gas India owns 30 percent stakes in oil and gas
fields on the west coast of India. The sale has been held up by a
dispute between BG Group, and Enron's two Indian partners,
Reliance Industries Inc. and Oil & Natural Gas Corp. Ltd., over
who will manage the operations.

     B.G. Group said Monday it was continuing negotiations
although its agreement with Enron had expired.

     The asset sales are part of a plan Enron began more than a
year ago to return to its ``core operations'' and ``derive as much
value as possible from enterprises'' it bought or developed, the
company said in court papers. Enron said it's ``critical to the
success'' of its reorganization that its affiliates complete the
transactions started before the Dec. 2 bankruptcy filing.

--Jeff St.Onge in Washington (202) 624-1946 or



Enron's Woes Cost New York Pension Funds $109 Mln, Paper Says
2001-12-28 12:05 (New York)

     New York, Dec. 28 (Bloomberg) -- Enron Corp. is facing a
lawsuit from New York City over $109 million in pension-fund
losses because of investments in the company's stock, the New York
Daily News reported.

     The city filed suit against the energy trading company
because of ``accounting irregularities and fraud involved here
with the company,'' said David Neustadt, a spokesman for
Controller Alan Hevesi. Enron declined to comment, the paper said.

     The controller's office oversees pension funds worth
$85 billion for teachers, police, firemen, board of education
workers and others. Spokesmen for the police, fire, and teachers'
unions declined to comment, and a spokeswoman for District Council
37, the city's largest public employees union, didn't return
calls, the paper said.

     The news comes after reports that New York State's
$112 billion pension fund lost $58 million on Enron, the paper
said, citing state Controller Carl McCall's office.

(Daily News 12-28 85)

For the New York Daily News Web site, see {NYDN <GO>}.

--Judy Fettner in the Princeton newsroom, (609) 750-4636 or at
jfettner1@bloomberg.netjjs



Bush `Concerned,' Says Government Must Look Into Enron Collapse
2001-12-28 11:17 (New York)

Bush `Concerned,' Says Government Must Look Into Enron Collapse

     Crawford, Texas, Dec. 28 (Bloomberg) -- President George W.
Bush said the government needs to look into what happened at Enron
Corp. and he's concerned about employees who lost their savings
when the Houston-based energy trader collapsed.

     ``The government will be looking into this,'' Bush told
reporters during a visit to his Texas ranch. ``I'm deeply
concerned about the citizens of Houston who worked for Enron and
lost savings.  It's very troubling.''

     Enron this month filed the largest Chapter 11 bankruptcy case
in history after its credit rating was cut to junk levels and it
couldn't raise cash to back trades. The company last month
restated five years of earnings to reflect losses and debt held by
affiliated partnerships.

     The U.S. Securities and Exchange Commission, the Justice
Department and Congress are investigating Enron's collapse. Former
chief executive Jeff Skilling and former chief financial officer
Andrew Fastow are named as defendants in more than 40 lawsuits
filed by investors and former employees who lost retirement
accounts after Enron's shares plunged. The stock, which began the
year at $83.13, traded this morning at 58 cents.

     The company and its employees, including chairman and chief
executive Ken Lay, have long been top financial supporters of Bush
and other Republicans. Enron and its employees have donated
$572,350 to Bush over the course of his political career.

     Bush said he's had no contact with Lay or other Enron
officials in the last six weeks.

     Enron and Lay have had close ties to the Bush administration.
Lay had a private meeting with Vice President Dick Cheney as the
White House shaped an energy policy that called for an increase in
domestic energy sources. Lay also participated in roundtables with
Bush and other business executives about the economy.

--Heidi Przybyla in Crawford and Holly Rosenkrantz in Washington,