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May 27, 2005

Comments

Chutzpah, yes indeed.

My favorite story of Jeffrey Skilling is the "joke" he told at a conference during the California electricity crisis: "What's the difference between the Titanic and California? The Titanic went down with the lights on."

This provoked the thought of a similar joke (I believe others have coined it too): "what's the difference between the Titanic and Enron? On the Titanic, the captain went down with the ship."

I wonder if Lay & Skilling will try to appeal that decision once Priscilla Owen is sworn in.

Because there could be a little tiny kernel of absurdist truth in their claim, if the money is in an insurance account set up specifically to defend corporate officers' errors and omissions.

Owen, the Corporate Handmaid, would tell the former Enron employees they're SOL, because the money is in Pot A, not Pot B, and cannot be used to pay costs arising from Pot B. (I admit, I'm not familiar enough with Enron's bankruptcy to know whether those accounts are still separate, or have all been liquidated to pay creditors.)

Is Owen going to be on the Appeals court that handles Texas cases?

"Is Owen going to be on the Appeals court that handles Texas cases?"

Yes.

The employee pension situation is one I feel strongly about in general, and have commented on elsewhere.

The degree of underfunding - close to $300 billion - is a scandal, especially since many of these firms seem to have the cash for dividends.

What puzzles me is why the Democrats don't make a major issue out of this. It is perfect:

1. Take the side of the worker and retiree
2. No "government giveaway" involved - just make corporations live up to their commitments.
3. Strong appeal to voters in Florida, and probably the industrial states where DB pension plans are more common.
4. Make accountability the theme - quote all that Republican rhetoric from the debate over the bankruptcy bill.
5. And it's easy to understand: why should companies pay dividends, which are totally discretionary payments to shareholders, when they are not meeting their obligations to workers?

I think Harry Reid or someone should be all over this, preferably before more retirees get stiffed.

What else could we expect from Kenny Boy and Skilling? I encourage everyone to see Enron: The Movie. Yes, it will add to your 'outrage overload' that is life under Bushco but it is well worth seeing.

But think of the moral hazard here. By God, if we let those Enron workers, especially the older ones who have lost it all with no time to secure their medical and retirement future reclaim these assets that they lost with eyes wide shut, then, well, their financial suffering will be eased and they'll think the world owes them a living and then where will we be, I ask you?

If they want to live like that and not take the consequences of their decisions with a big entrepreneurial smile, then move to Cuba, for crying out loud. Without the threat of starvation and medical indigency, why, well, you know ...

"What puzzles me is why the Democrats don't make a major issue out of this."

Well, I've blogged about it. I don't get to speak for "the Democrats," though.

Isn't it kind of impressive that, no matter how evil you think these guys are, they manage to be even MORE evil with each new development?

Ken Lay for UN ambassador!

bastards.

The two former executives, who will face criminal trial in January 2006 on charges including conspiracy and fraud at the company, had argued the funds came from Enron's corporate insurance policies that were to be used to help pay for their legal defense.

That induced some coffee out the nose, hilzoy. Try to warn me, next time.

I'm hoping this will begin moving things toward a heirarchy of what financial burdens ought to be serviced first, when a company goes nipples-up.

Nipples Up? Interesting visual, Slart.

Of course Lay and Skilling were betraying the company and its owners, the shareholders, they should not see one dime of defense money from Enron. While there has been some improvement in corporate governance since Enron tanked, we really need to pull back more on the power of executives to help themselves to the money of corporations. These companies are not theirs and we have seen too many executives acting in a way that would put lawyers in jail if they were engaged in such conflicts of interest.

My mom used to say that people thought she'd already done more scandalous things than she ever did. After a while, she figured she might as well do those things, and have the associated fun, if she were going to have the reputation anyway.

I reckon the Enron guys look at it the same way. Everyone looks at them as devils already; there's no reason to try to preserve any other image anymore.

Interesting visual, Slart.

I read somewhere that males are visually stimulated.

I read somewhere that males are visually stimulated.

I read somewhere that females are too; they just don't say so.

The degree of underfunding - close to $300 billion - is a scandal, especially since many of these firms seem to have the cash for dividends.

What puzzles me is why the Democrats don't make a major issue out of this.

I think the problem is that unions have too often been complicit in the underfunding. They like to negotiate good pension benefits, but they also want as much as possible of the company's cash going to current compensation rather than funding the pension plan, so they'll be right in there with management asking Congress to let the company get away with putting less cash into its plans than it needs to fund the benefits it's promised. I believe that's a major reason why such a high percentage of the PBGC's total claims come from the airline and steel industries (75%+, IIRC).

"Well, I've blogged about it. I don't get to speak for "the Democrats," though. "

Posted by: Gary Farber | May 27, 2005 12:19 PM


Yes you are, Gary - you're 'on' for this weekend;
we'll all be on vacation (in San Francisco, of course).

Sorry you didn't get the note.

Hey I thought Norbizness was the Left!

we'll all be on vacation (in San Francisco, of course).

Remember to dress in layers...

DaveL,

I wasn't aware of that. It doesn't really make sense for the union to take that position, but that may not stop them.

Bernard, unfortunately, I think it makes sense if you put yourself in the position of the union leadership rather than the membership. They get to tell their members what a great deal they negotiated--increased pensions AND more money in your paycheck next month--and most members aren't going to be paying much attention to what the pension plan's funding situation looks like. Like every other human institution I can think of, unions have their own set of agency problems.

Like every other human institution I can think of, unions have their own set of agency problems.

No doubt. I imagine this comes up in other areas as well. When you're negotiating a compensation package members will value different components differently. Older members might, for example, be willing to give ground on wages in exchange for better health benefiits, while younger members would have the opposite preference.

Still, I'm not sure unions would actually oppose legislation that, say, restricted dividend payments unless pension plans were fully funded, and that protected them well in bankruptcy proceedings. Opposing this would be very hard to explain.

DaveL,

Today's Financial Times has a front-page story on the problems at PBGC. From the article,

"Corporations and trade unions have lobbied Congress to avert a sharp rise in premiums paid to the PBGC."

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