-----Original Message-----
From: 	Hall, Steve C. (Legal)  
Sent:	Thursday, December 20, 2001 3:10 PM
To:	Heizenrader, Tim
Subject:	You'll enjoy this

He notes that Enron management lacked an 'honor among thieves,' but predicts that Enron alumni will flourish.  I suspect he is working on the Enron book right now.---sch
Is Enron the New Drexel? 
By Michael Lewis, the author of ``Liar's Poker'' and ``The New New Thing.''
Berkeley, California, Dec. 20 (Bloomberg) -- Enron Corp. is rapidly expanding the American business journalists' notion of what is possible: No story can ever again be said to be too outrageous to be true. 
The boss, Kenneth Lay, was a friend of the current president of these United States, an adviser to his administration and one of his biggest financial backers. The company itself was rated ``strong buy'' by analysts at almost every Wall Street firm, considered a shining example of modern accounting by reputable accounting firms, and plugged endlessly by the business press. Six years running as Fortune's most innovative company! And all the while this same operation was, at the very top, a lie. 
Understandably, people long for some analogy to help them grasp this situation, but really there isn't a good one. 
Other than failed hedge fund Long-Term Capital Management, Michael Milken's junk bond department at Drexel Burnham Lambert offers the closest parallels on Wall Street, and several people have written to me over the past week to suggest it. But it really is unfair to Milken to compare him to Lay. 
Alumni Will Flourish 
True, in both cases profitable trading businesses collapsed because their creditors came to distrust the people who ran them. And in both cases the core business -- Drexel's junk bonds and Enron's energy trading -- remain viable in the hands of other companies that banks trust. 
Just as the Drexel junk bond traders who didn't go to jail went to other Wall Street firms and created replicas of their former business, former Enron traders will soon be making lots of money for one-time rivals such as Dynegy Inc. and Duke Energy Corp. Well before Kenneth Lay emerges from his legal hell, the energy trading business will return to normal. 
But the morality of the cases are entirely different. Whatever you think of Milken's junk bond department -- and I think its sins were minor beside its achievements -- you must admit the people in it exhibited a certain honor among thieves. 
There was never a moment when Milken betrayed the broad interests of his traders for his own narrow ones. He paid himself huge sums of money, but he also made huge sums for his firm. He was careful to watch out for the little people who worked for him, and they loved him for it. The Enron bosses, by contrast, pillaged their firm and left the little people who worked for them holding the bag. 
Different Motivations 
Enron created the illusion that it was much more profitable than it actually was. Milken created an operation which was, if anything, much more profitable than it looked. What Milken hid was the thuggish manner in which he made his profits. What Enron hid was the sneaky way it made its losses. 
(This is something I still don't understand, and would love for some enterprising reporter to explain, as Enron seems intent on explaining nothing. The off-the-books partnerships that brought Enron down appear to have been a mechanism for hiding bad investments in hard assets -- Turkish gas pipelines, Indian power plants and the like. Why did Enron, which made its money as an intermediary, invest in this stuff in the first place?) 
The speed with which the markets have punished Enron reflects the differences between it and Drexel. In Drexel's case, it took a multiyear investigation by the U.S. government, together with a smear campaign in the press, to bring down the business. In Enron's case, all it took was a couple of articles in the Wall Street Journal pointing out, among other things, that senior executives were profiting at the company's expense. 
In Drexel's case, the demise of the firm and the jailing of Milken was pretty much the end of the story. In Enron's, the fate of the company and its leaders may open up a much bigger scandal that reaches right up to the top. Anything is possible. 
 
Berkeley, California, Dec. 20 (Bloomberg) -- Enron Corp. is rapidly expanding the American business journalists' notion of what is possible: No story can ever again be said to be too outrageous to be true. 
The boss, Kenneth Lay, was a friend of the current president of these United States, an adviser to his administration and one of his biggest financial backers. The company itself was rated ``strong buy'' by analysts at almost every Wall Street firm, considered a shining example of modern accounting by reputable accounting firms, and plugged endlessly by the business press. Six years running as Fortune's most innovative company! And all the while this same operation was, at the very top, a lie. 
Understandably, people long for some analogy to help them grasp this situation, but really there isn't a good one. 
Other than failed hedge fund Long-Term Capital Management, Michael Milken's junk bond department at Drexel Burnham Lambert offers the closest parallels on Wall Street, and several people have written to me over the past week to suggest it. But it really is unfair to Milken to compare him to Lay.