The ghosts of the Enron Corporation are haunting us still, and they are a lot scarier than any horror movie ghosts because, unlike the Hollywood variety, these ghosts still have enough substance to cause an economic nightmare.
I have a lot of familiarity with the Enron scandal because in 2001 and 2002, I ran a corporate accountability project that focused a great deal of attention on what was going down at that rotten, corrupt corporation. We set up a war room operation to track what was going on in the case, put out a 10 minute informational video, ran a TV ad linking Bush and Cheney to corporate scandals that helped drive down Bush's approval ratings 15 points in six weeks, and even created one of the first blogs in the country, something we called the DailyEnron. (In 2001, I don't know the term blog existed, we certainly didn't call it a blog, just thought of it as daily update people could go to for information on the case -- who knew I'd be such a trendsetter?)
The Enron story was pretty incredible. The company had not only soared in value to become the seventh highest valued corporation in America, but was almost universally praised and revered as a model company in the modern American economy. And the sad truth is: it was. In spite, or maybe because of, its legal and ethical crimes, its methods of manipulating markets infected the entire financial industry.
What brought all this to mind, of course, is the NYT article on JP Morgan Chase's various problems with regulators. When I read about JPM's "manipulative schemes" in the energy markets, I got a serious flashback to my Enron work over a decade ago, because it was Enron's energy market trading manipulations that brought both them and powerhouse accounting firm Arthur Andersen down. The thing that is giving me nightmares about this ghost story, though, is that JPM Chase has grown so big and powerful just a dozen years later that no matter what crimes they commit, there might be no accountability.
In recent months, JPM has lost $6 billion in the London whale trading scandal; has been called out by an incredibly damning Senate committee investigation for lying to and hiding information from regulators; has been investigated by the OCC for the way it collected credit card debt; has been accused of failing to alert SEC and OCC authorities about what it knew about Bernie Madoff; has been sued by the NY Attorney General for defrauding investors on mortgage backed securities; has been sued by Freddie Mac over LIBOR, and has been sent LIBOR-related subpoenas by two state AGs; and now is being investigated by FERC for Enron-style energy trading. That is seven different sectors of government investigating, suing, or condemning the executives at JPM. And that doesn't even include the foreclosure fraud and perjury scandal they were a part of, or all the different ways their arrogance helped bring on the biggest financial collapse since the Great Depression.
Just how many agencies does Jamie Dimon have to blow off before someone does something? How many Senate committees does he have to lie to? Will DOJ ever do anything?
This is where another ghost of Enron is affecting us: DOJ officials have said that they want to be careful of prosecuting banks because they don't want to risk big companies going bankrupt like poor old Enron and Arthur Andersen did in 2001-2. Are companies being protected because they are Too Big To Jail? There is no longer any doubt when our Attorney General Eric Holder says something like this on the record:
But I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if we do prosecute -- if we do bring a criminal charge -- it will have a negative impact on the national economy, perhaps even the world economy. I think that is a function of the fact that some of these institutions have become too large.
And you know what makes all this even worse? The fact that in spite of all these legal and ethical issues, JPM's stock hasn't fallen, their clients aren't deserting in droves. Everyone is so used to this kind of thing, and so sure that DOJ won't do anything, that unlike the past when these sorts of issues would have meant disaster for the company, they don't seem to be effected at all.
This is one of many reasons (but certainly one of the biggest) why these banks have to be broken up: when you are this dirty and DOJ won't prosecute, our nation is in deep trouble. Another reason to do everything we can to help Sherrod Brown break these financial monsters up. It is time.
I remember the arrogance and immorality of the Enron executives very well. Their memoranda and emails to each other that were discovered in the aftermath of their crash reeked of it. And the big banks are bigger, more arrogant, and more powerful than Enron. It is time to break up these bad guys up.