Remora

According to a NYT article today, Cayman Island hosts more than 400 banks and 47,000 partnerships.

Not to fear, however, upscale reader. The NYT is infinitely understanding of the necessity, in the hot to trot global economy, of such multitudinous activity:

"Although Enron's multitude of partnerships have raised suspicions, officials and executives here said such companies are legitimately used by major corporations to defer taxes, maximize profits or provide a tax-neutral setting for deals involving businesses in two countries with different tax rates. Aircraft deals have become popular here, for example, because the island's stability is acceptable to manufacturers and insurers who worry about the political climate or legal protections of some Third World clients."

Ah, we understand now. If it is about Maximizing profits -- words that issue in thunder from the American exec's lips -- and we must, as the Nine Inch Nails song advises, bow down. One imagines the NYT about building the pyramids: Although Pharaoh Khufu's importation of slaves has raised suspicions of depopulating the Sudan, officials and executives here said that the Sudan was legitimately resourced in order to defer divine wrath, maximize the ruler's ability to proceed efficiently into the afterlife, and provide a working force capability for dangerous tasks unsuited to the court's own, more highly trained servants.

As though to emphasize the essential toothlessness of the criticism of Enron (mustn't let this spill over into criticizing deregulation itself, my god. The mantra must be defended), there's a story on the business page in which many a former consultant for Enron is quoted as to the essential soundness of the Enron business model


"According to experts who consulted for Enron in the field of finance, the company did not necessarily come up with a lot of powerful new ideas. Its strength was in synthesizing existing ideas, which sometimes led to innovative methods.

"They took a lot of finance theory and applied it in the context of their business," said Ramesh K. S. Rao, a professor of finance at the University of Texas who once consulted for Enron. "There was no magic to what they were doing."

Robert L. McDonald, a professor of finance at Northwestern, advised Enron on the use of derivatives from 1993 to 1995. He said the company needed advanced financial tools to price its derivatives, which specified energy products to be delivered at various times and sites while demand was uncertain. "That's a hard problem, so they were probably breaking some new ground trying to deal with that," he said. "It's the kind of thing that's easy to describe and may be hard to do."

Now, Limited Inc is a simple yokel, but isn't the question of expertise rather begged, here? Perhaps the experts that consulted for Enron displayed, in their spectacular bad judgment about what constitutes a good corporation, something like, well, in-expertise. It is a little like quoting professors of Marxist-Leninism who 'consulted' for the Soviet Union. And perhaps the interest of this group in maintaining an unregulated derivatives market should, uh, make us wonder whether this is the group of experts we want to turn to about Enron. The old excuse for the absense of oversight with regard to derivatives, hedge funds, and the like, is that these are games played by the rich exclusively for the rich. Why regulate, the story goes, when we are talking about multi-millionaires, who can take care of themselves? The problem with that argument is that it makes a bogus assumption: the money of the super-rich does not effect the rest of us. Well, it does. When the hedge fund of the super-rich borrows money from a bank, it automatically effects the clientele of the bank. When a trading company engages in rash energy derivatives trading that, for a brief time, brings about sharp increases in energy prices (California), it effects all the end users of energy. The excuse that somehow, high risk derivatives are separate from the rest of the economy, is threadbare. My brother told me that he listened to some Frontline last year, in which Kenny Boy Lay was interviewed, and that his impression was that Enron was pure evil. Limited Inc mentions this because we've talked to a person who works in the business school at UT who essentially said the same thing about listening to a talk given by some Enron exec about 'commodifying' water. These visceral responses register something important about the violation of a communal sense of decency -- a violation that expert consultants encourage, numb to this communal sense, which they dismiss as Luddite, or as out-group primitivism. Well, Limited Inc takes its stand with the hold-outs, the last adapters, the ones who resist. So there.