I direct the reader to page 38, note 3, of Enron’s annual report of 2000, a mere one year before the firm imploded:
Securitizations. From time to time, Enron sells interests in certain of its financial assets. Some of these sales are completed in securitizations, in which Enron concurrently enters into swaps associated with the underlying assets which limit the risks assumed by the purchaser. Such swaps are adjusted to fair value using quoted market prices, if available, or estimated fair value based on management’s best estimate of the present value of future cash flow. These swaps are included in Price Risk Managements activities above as equity investments.
The text was undoubtedly fussed over by a platoon of lawyers in order to achieve just the right balance of disclosure and evasion. It essentially says that Enron might have sold some assets, or it might not have sold some assets; those sales, if any, might have included securitizations, or they might not have included securitizations; those securitizations might have had a market price, or they might not have had a market price; if they didn’t, then Enron’s management gave them a price according to “management’s best estimate”— which is to say whatever management believed they were worth.
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| — | In the true spirit of Jennifer Szalai’s current Harper’s essay “The Banality of Avarice: Why the finance industry never had to lie,” ostensibly a review of James B. Stewart’s book Tangled Webs: How False Statements are Undermining America: From Martha Stewart to Bernie Madoff but actually a broader-ranging look at how, per David Foster Wallace’s The Pale King, “abstruse dullness is actually a much more effective shield than is secrecy,” one of the most astonishing little nuggets from her piece is buried in a footnote. |
